UTILITIES CODE

TITLE 1. GENERAL PROVISIONS

CHAPTER 1. GENERAL PROVISIONS
Sec. 1.001. PURPOSE OF CODE. (a) This code is enacted as a
part of the state's continuing statutory revision program, begun by
the Texas Legislative Council in 1963 as directed by the legislature
in the law codified as Section 323.007, Government Code. The program
contemplates a topic-by-topic revision of the state's general and
permanent statute law without substantive change.
(b) Consistent with the objectives of the statutory revision
program, the purpose of this code is to make the law encompassed by
this code more accessible and understandable by:
(1) rearranging the statutes into a more logical order;
(2) employing a format and numbering system designed to
facilitate citation of the law and to accommodate future expansion of
the law;
(3) eliminating repealed, duplicative, unconstitutional,
expired, executed, and other ineffective provisions; and
(4) restating the law in modern American English to the
greatest extent possible.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 1.002. CONSTRUCTION OF CODE. Chapter 311, Government Code

(Code Construction Act), applies to the construction of each
provision in this code except as otherwise expressly provided by this
code.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 1.003. REFERENCE IN LAW TO STATUTE REVISED BY CODE. A

reference in a law to a statute or a part of a statute revised by
this code is considered to be a reference to the part of this code
that revises that statute or part of that statute.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

TITLE 2. PUBLIC UTILITY REGULATORY ACT

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SUBTITLE A. PROVISIONS APPLICABLE TO ALL UTILITIES

CHAPTER 11. GENERAL PROVISIONS
Sec. 11.001. SHORT TITLE. This title may be cited as the
Public Utility Regulatory Act.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 11.002. PURPOSE AND FINDINGS. (a) This title is enacted

to protect the public interest inherent in the rates and services of
public utilities. The purpose of this title is to establish a
comprehensive and adequate regulatory system for public utilities to
assure rates, operations, and services that are just and reasonable
to the consumers and to the utilities.
(b) Public utilities traditionally are by definition monopolies
in the areas they serve. As a result, the normal forces of
competition that regulate prices in a free enterprise society do not
operate. Public agencies regulate utility rates, operations, and
services as a substitute for competition.
(c) Significant changes have occurred in the telecommunications
and electric power industries since the Public Utility Regulatory Act
was originally adopted. Changes in technology and market structure
have increased the need for minimum standards of service quality,
customer service, and fair business practices to ensure high-quality
service to customers and a healthy marketplace where competition is
permitted by law. It is the purpose of this title to grant the
Public Utility Commission of Texas authority to make and enforce
rules necessary to protect customers of telecommunications and
electric services consistent with the public interest.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 1579, Sec. 1, eff. Aug. 30, 1999.

Sec. 11.003. DEFINITIONS. In this title:

(1) "Affected person" means:
(A) a public utility or electric cooperative affected
by an action of a regulatory authority;
(B) a person whose utility service or rates are
affected by a proceeding before a regulatory authority; or
(C) a person who:

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(i) is a competitor of a public utility with

respect to a service performed by the utility; or
(ii) wants to enter into competition with a public
utility.
(2) "Affiliate" means:
(A) a person who directly or indirectly owns or holds
at least five percent of the voting securities of a public utility;
(B) a person in a chain of successive ownership of at
least five percent of the voting securities of a public utility;
(C) a corporation that has at least five percent of its
voting securities owned or controlled, directly or indirectly, by a
public utility;
(D) a corporation that has at least five percent of its
voting securities owned or controlled, directly or indirectly, by:
(i) a person who directly or indirectly owns or
controls at least five percent of the voting securities of a public
utility; or
(ii) a person in a chain of successive ownership of
at least five percent of the voting securities of a public utility;
(E) a person who is an officer or director of a public
utility or of a corporation in a chain of successive ownership of at
least five percent of the voting securities of a public utility; or
(F) a person determined to be an affiliate under
Section 11.006.
(3) "Allocation" means the division among municipalities or
among municipalities and unincorporated areas of the plant, revenues,
expenses, taxes, and reserves of a utility used to provide public
utility service in a municipality or for a municipality and
unincorporated areas.
(3-a) "Chilled water program" means:
(A) a program to produce chilled water at a central
plant and pipe that water to buildings for air conditioning,
including a district cooling system or chilled water service; or
(B) any other program designed to used chilled water to
provide air conditioning, reduce peak electric demand, or shift
electric load.
(4) "Commission" means the Public Utility Commission of
Texas.
(5) "Commissioner" means a member of the Public Utility
Commission of Texas.

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(6)
"Cooperative corporation" means:
(A) an electric cooperative; or
(B) a telephone cooperative corporation organized under
Chapter 162 or a predecessor statute to Chapter 162 and operating
under that chapter.
(7) "Corporation" means a domestic or foreign corporation,
joint-stock company, or association, and each lessee, assignee,
trustee, receiver, or other successor in interest of the corporation,
company, or association, that has any of the powers or privileges of
a corporation not possessed by an individual or partnership. The
term does not include a municipal corporation or electric
cooperative, except as expressly provided by this title.
(8) "Counsellor" means the public utility counsel.
(9) "Electric cooperative" means:
(A) a corporation organized under Chapter 161 or a
predecessor statute to Chapter 161 and operating under that chapter;
or
(B) a corporation organized as an electric cooperative
in a state other than Texas that has obtained a certificate of
authority to conduct affairs in the State of Texas.
(C) Deleted by Acts 2003, 78th Leg., ch. 1327, Sec. 1.
(10) "Facilities" means all of the plant and equipment of a
public utility, and includes the tangible and intangible property,
without limitation, owned, operated, leased, licensed, used,
controlled, or supplied for, by, or in connection with the business
of the public utility.
(11) "Municipally owned utility" means a utility owned,
operated, and controlled by a municipality or by a nonprofit
corporation the directors of which are appointed by one or more
municipalities and includes any chilled water program operated by the
utility.
(12) "Office" means the Office of Public Utility Counsel.
(13) "Order" means all or a part of a final disposition by
a regulatory authority in a matter other than rulemaking, without
regard to whether the disposition is affirmative or negative or
injunctive or declaratory. The term includes:
(A) the issuance of a certificate of convenience and
necessity; and
(B) the setting of a rate.
(14) "Person" includes an individual, a partnership of two

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or more persons having a joint or common interest, a mutual or

cooperative association, and a corporation, but does not include an
electric cooperative.
(15) "Proceeding" means a hearing, investigation, inquiry,
or other procedure for finding facts or making a decision under this
title. The term includes a denial of relief or dismissal of a
complaint.
(16) "Rate" includes:
(A) any compensation, tariff, charge, fare, toll,
rental, or classification that is directly or indirectly demanded,
observed, charged, or collected by a public utility for a service,
product, or commodity described in the definition of utility in
Section 31.002 or 51.002; and
(B) a rule, practice, or contract affecting the
compensation, tariff, charge, fare, toll, rental, or classification.
(17) "Ratemaking proceeding" means a proceeding in which a
rate is changed.
(18) "Regulatory authority" means either the commission or
the governing body of a municipality, in accordance with the context.
(19) "Service" has its broadest and most inclusive meaning.
The term includes any act performed, anything supplied, and any
facilities used or supplied by a public utility in the performance of
the utility's duties under this title to its patrons, employees,
other public utilities, an electric cooperative, and the public. The
term also includes the interchange of facilities between two or more
public utilities. The term does not include the printing,
distribution, or sale of advertising in a telephone directory.
(20) "Test year" means the most recent 12 months, beginning
on the first day of a calendar or fiscal year quarter, for which
operating data for a public utility are available.
(21) "Trade association" means a nonprofit, cooperative,
and voluntarily joined association of business or professional
persons who are employed by public utilities or utility competitors
to assist the public utility industry, a utility competitor, or the
industry's or competitor's employees in dealing with mutual business
or professional problems and in promoting their common interest.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 405, Sec. 1, eff. Sept. 1, 1999; Acts
2003, 78th Leg., ch. 1327, Sec. 1, eff. Sept. 1, 2003.

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Amended by:
Acts 2021, 87th Leg., R.S., Ch. 277 (H.B. 3615), Sec. 2, eff.
September 1, 2021.

Sec. 11.004. DEFINITION OF UTILITY. In Subtitle A, "public

utility" or "utility" means:
(1) an electric utility, as that term is defined by Section
31.002; or
(2) a public utility or utility, as those terms are defined
by Section 51.002.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 11.0042. DEFINITION OF AFFILIATE. (a) The term "person"

or "corporation" as used in the definition of "affiliate" provided by
Section 11.003(2) does not include:
(1) a broker or dealer registered under the Securities
Exchange Act of 1934 (15 U.S.C. Section 78a et seq.), as amended;
(2) a bank or insurance company as defined under the
Securities Exchange Act of 1934 (15 U.S.C. Section 78a et seq.), as
amended;
(3) an investment adviser registered under state law or the
Investment Advisers Act of 1940 (15 U.S.C. Section 80b-1 et seq.); or
(4) an investment company registered under the Investment
Company Act of 1940 (15 U.S.C. Section 80a-1 et seq.); or
(5) an employee benefit plan, pension fund, endowment fund,
or other similar entity that may, directly or indirectly, own, hold,
or control five percent or more of the voting securities of a public
utility or the parent corporation of a public utility if the entity
did not acquire the voting securities:
(A) for the purpose of or with the effect of changing
or influencing the control of the issuer of the securities; or
(B) in connection with or as a participant in any
transaction that changes or influences the control of the issuer of
the securities.
(b) For the purpose of determining whether a person is an
affiliate under Section 11.006(a)(3), the term "person" does not
include an entity that may, directly or indirectly, own, hold, or

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control the voting securities of a public utility or the parent

corporation of a public utility if the entity did not acquire the
voting securities:
(1) for the purpose of or with the effect of changing or
influencing the control of the issuer of the securities; or
(2) in connection with or as a participant in any
transaction that changes or influences the control of the issuer of
the securities.
(c) A report filed by an entity described by Subsection (a)(5)
or (b) with the Securities and Exchange Commission is conclusive
evidence of the entity's intent if the report confirms that the
voting securities were not acquired:
(1) for the purpose of or with the effect of changing or
influencing the control of the issuer of the securities; or
(2) in connection with or as a participant in any
transaction that changes or influences the control of the issuer of
the securities.

Added by Acts 2005, 79th Leg., Ch. 413 (S.B. 1668), Sec. 2, eff. June
17, 2005.

Sec. 11.005. ENTITY, COMPETITOR, OR SUPPLIER AFFECTED IN MANNER

OTHER THAN BY SETTING OF RATES. In this title, an entity, including
a utility competitor or utility supplier, is considered to be
affected in a manner other than by the setting of rates for that
class of customer if during a relevant calendar year the entity
provides fuel, utility-related goods, utility-related products, or
utility-related services to a regulated or unregulated provider of
telecommunications or electric services or to an affiliate in an
amount equal to the greater of $10,000 or 10 percent of the person's
business.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 11.006. PERSON DETERMINED TO BE AFFILIATE. (a) The

commission may determine that a person is an affiliate for purposes
of this title if the commission after notice and hearing finds that
the person:
(1) actually exercises substantial influence or control

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over the policies and actions of a public utility;

(2) is a person over which a public utility exercises the
control described by Subdivision (1);
(3) is under common control with a public utility; or
(4) together with one or more persons with whom the person
is related by ownership or blood relationship, or by action in
concert, actually exercises substantial influence over the policies
and actions of a public utility even though neither person may
qualify as an affiliate individually.
(b) For purposes of Subsection (a)(3), "common control with a
public utility" means the direct or indirect possession of the power
to direct or cause the direction of the management and policies of
another, without regard to whether that power is established through
ownership or voting of securities or by any other direct or indirect
means.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 11.007. ADMINISTRATIVE PROCEDURE. (a) Chapter 2001,

Government Code, applies to a proceeding under this title except to
the extent inconsistent with this title.
(b) A communication of a member or employee of the commission
with any person, including a party or a party's representative, is
governed by Section 2001.061, Government Code.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 11.008. LIBERAL CONSTRUCTION. This title shall be

construed liberally to promote the effectiveness and efficiency of
regulation of public utilities to the extent that this construction
preserves the validity of this title and its provisions.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 11.009. CONSTRUCTION WITH FEDERAL AUTHORITY. This title

shall be construed to apply so as not to conflict with any authority
of the United States.

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Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

CHAPTER 12. ORGANIZATION OF COMMISSION

SUBCHAPTER A. GENERAL PROVISIONS
Sec. 12.001. PUBLIC UTILITY COMMISSION OF TEXAS. The Public
Utility Commission of Texas exercises the jurisdiction and powers
conferred by this title.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 12.002. OFFICE. (a) The principal office of the

commission is in Austin.
(b) The office shall be open daily during usual business hours.
The office is not required to be open on Saturday, Sunday, or a legal
holiday.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 12.003. SEAL. (a) The commission has a seal bearing the
inscription: "Public Utility Commission of Texas."
(b) The seal shall be affixed to each record and to an
authentication of a copy of a record. The commission may require the
seal to be affixed to other instruments.
(c) A court of this state shall take judicial notice of the
seal.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 12.004. REPRESENTATION BY THE ATTORNEY GENERAL. The

attorney general shall represent the commission in a matter before a
state court, a court of the United States, or a federal public
utility regulatory commission.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 12.005. APPLICATION OF SUNSET ACT. The Public Utility

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Commission of Texas is subject to Chapter 325, Government Code (Texas

Sunset Act). Unless continued in existence as provided by that
chapter or by Chapter 39, the commission is abolished September 1,
2029.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 405, Sec. 2, eff. Sept. 1, 1999; Acts
1999, 76th Leg., ch. 1212, Sec. 1, eff. Sept. 1, 1999.
Amended by:
Acts 2005, 79th Leg., Ch. 797 (S.B. 408), Sec. 1, eff. September
1, 2005.
Acts 2011, 82nd Leg., R.S., Ch. 1232 (S.B. 652), Sec. 1.08(a),
eff. June 17, 2011.
Acts 2013, 83rd Leg., R.S., Ch. 170 (H.B. 1600), Sec. 1.01, eff.
September 1, 2013.
Acts 2019, 86th Leg., R.S., Ch. 596 (S.B. 619), Sec. 3.07, eff.
June 10, 2019.
Acts 2021, 87th Leg., R.S., Ch. 850 (S.B. 713), Sec. 1.06, eff.
June 16, 2021.
Acts 2023, 88th Leg., R.S., Ch. 410 (H.B. 1500), Sec. 1, eff.
September 1, 2023.

SUBCHAPTER B. COMMISSION APPOINTMENT AND FUNCTIONS

Sec. 12.051. APPOINTMENT; TERM. (a) The commission is
composed of five commissioners appointed by the governor with the
advice and consent of the senate.
(b) An appointment to the commission shall be made without
regard to the race, color, disability, sex, religion, age, or
national origin of the appointee.
(c) Commissioners serve staggered, six-year terms.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2021, 87th Leg., R.S., Ch. 1052 (S.B. 2154), Sec. 1, eff.
June 18, 2021.

Sec. 12.052. PRESIDING OFFICER. (a) The governor shall

designate a commissioner as the presiding officer.
(b) The presiding officer serves in that capacity at the

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pleasure of the governor.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 12.0521. PRESIDING OFFICER QUALIFICATIONS. The

commissioner designated as the presiding officer must be a resident
of this state.

Added by Acts 2021, 87th Leg., R.S., Ch. 425 (S.B. 2), Sec. 1, eff.
June 8, 2021.

Sec. 12.053. MEMBERSHIP QUALIFICATIONS. (a) To be eligible

for appointment, a commissioner must:
(1) be a qualified voter;
(2) be a citizen of the United States;
(3) be a resident of this state;
(4) be a competent and experienced administrator; and
(5) have at least five years of experience:
(A) in the administration of business or government; or
(B) as a practicing attorney, certified public
accountant, or professional engineer.
(a-1) At least two commissioners must be well informed and
qualified in the field of public utilities and utility regulation.
(b) A person is not eligible for appointment as a commissioner
if the person:
(1) at any time during the one year preceding appointment:
(A) personally served as an officer, director, owner,
employee, partner, or legal representative of a public utility
regulated by the commission or of an affiliate or direct competitor
of a public utility regulated by the commission;
(B) owned or controlled, directly or indirectly, more
than a 10 percent interest in a public utility regulated by the
commission or in an affiliate or direct competitor of a public
utility regulated by the commission; or
(C) served as an executive officer listed under Section
1, Article IV, Texas Constitution, other than the secretary of state,
or a member of the legislature; or
(2) is not qualified to serve under Section 12.151, 12.152,
or 12.153.

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Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2013, 83rd Leg., R.S., Ch. 170 (H.B. 1600), Sec. 1.02, eff.
September 1, 2013.
Acts 2021, 87th Leg., R.S., Ch. 1052 (S.B. 2154), Sec. 2, eff.
June 18, 2021.

Sec. 12.054. REMOVAL OF COMMISSIONER. (a) It is a ground for

removal from the commission if a commissioner:
(1) does not have at the time of appointment or maintain
during service on the commission the qualifications required by
Section 12.053;
(2) violates a prohibition provided by Section 12.053 or by
Subchapter D;
(3) cannot discharge the commissioner's duties for a
substantial part of the term for which the commissioner is appointed
because of illness or disability; or
(4) is absent from more than half of the regularly
scheduled commission meetings that the commissioner is eligible to
attend during a calendar year unless the absence is excused by
majority vote of the commission.
(b) The validity of an action of the commission is not affected
by the fact that the action is taken when a ground for removal of a
commissioner exists.
(c) If the executive director has knowledge that a potential
ground for removal exists, the executive director shall notify the
presiding officer of the commission of the potential ground. The
presiding officer shall then notify the governor and the attorney
general that a potential ground for removal exists. If the potential
ground for removal involves the presiding officer, the executive
director shall notify the next highest officer of the commission, who
shall notify the governor and the attorney general that a potential
ground for removal exists.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 12.055. PROHIBITION ON SEEKING ANOTHER OFFICE. A person

may not seek nomination or election to another civil office of this

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state or of the United States while serving as a commissioner. If a

commissioner files for nomination or election to another civil office
of this state or of the United States, the person's office as
commissioner immediately becomes vacant, and the governor shall
appoint a successor.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 12.056. EFFECT OF VACANCY. A vacancy or disqualification

does not prevent the remaining commissioner or commissioners from
exercising the powers of the commission.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 12.057. COMPENSATION. The annual salary of the

commissioners is determined by the legislature.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 12.058. MEETINGS. The commission shall hold meetings at

its office and at other convenient places in this state as expedient
and necessary for the proper performance of the commission's duties.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 12.059. TRAINING PROGRAM FOR COMMISSIONERS. (a) A person

who is appointed to and qualifies for office as a member of the
commission may not vote, deliberate, or be counted as a member in
attendance at a meeting of the commission until the person completes
a training program that complies with this section.
(b) The training program must provide the person with
information regarding:
(1) the law governing commission operations;
(2) the programs, functions, rules, and budget of the
commission;
(3) the scope of and limitations on the rulemaking
authority of the commission;

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(4) the results of the most recent formal audit of the

commission;
(5) the requirements of:
(A) laws relating to open meetings, public information,
administrative procedure, and disclosing conflicts of interest; and
(B) other laws applicable to members of a state policy-
making body in performing their duties; and
(6) any applicable ethics policies adopted by the
commission or the Texas Ethics Commission.
(c) A person appointed to the commission is entitled to
reimbursement, as provided by the General Appropriations Act, for the
travel expenses incurred in attending the training program regardless
of whether the attendance at the program occurs before or after the
person qualifies for office.
(d) The executive director of the commission shall create a
training manual that includes the information required by Subsection
(b). The executive director shall distribute a copy of the training
manual annually to each member of the commission. Each member of the
commission shall sign and submit to the executive director a
statement acknowledging that the member received and has reviewed the
training manual.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2005, 79th Leg., Ch. 797 (S.B. 408), Sec. 2, eff. September
1, 2005.
Acts 2023, 88th Leg., R.S., Ch. 410 (H.B. 1500), Sec. 2, eff.
September 1, 2023.

Sec. 12.060. FORMER COMMISSIONER: LOBBYING RESTRICTED. A

former member of the commission may not, before the first anniversary
of the date the member ceases to be a member of the commission,
engage in an activity before the commission that requires
registration under Chapter 305, Government Code.

Added by Acts 2021, 87th Leg., R.S., Ch. 1052 (S.B. 2154), Sec. 3,
eff. June 18, 2021.

SUBCHAPTER C. COMMISSION PERSONNEL

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Sec. 12.101. COMMISSION EMPLOYEES. The commission shall

employ:
(1) an executive director; and
(2) officers and other employees the commission considers
necessary to administer this title.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 405, Sec. 3, eff. Sept. 1, 1999.

Sec. 12.102. DUTIES OF EMPLOYEES. The commission shall develop

and implement policies that clearly separate the policymaking
responsibilities of the commission and the management
responsibilities of the commission employees.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2005, 79th Leg., Ch. 797 (S.B. 408), Sec. 3, eff. September
1, 2005.

Sec. 12.103. DUTIES OF EXECUTIVE DIRECTOR. The executive

director is responsible for the daily operations of the commission
and shall coordinate the activities of commission employees.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 12.105. CAREER LADDER PROGRAM; PERFORMANCE EVALUATIONS;

MERIT PAY. (a) The executive director or the executive director's
designee shall develop an intra-agency career ladder program that
addresses opportunities for mobility and advancement for commission
employees. The program shall require intra-agency posting of each
position concurrently with any public posting.
(b) The executive director or the executive director's designee
shall develop a system of annual performance evaluations that are
based on documented employee performance. Merit pay for commission
employees must be based on the system established under this
subsection.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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Sec. 12.106. EQUAL EMPLOYMENT OPPORTUNITY POLICY STATEMENT.

(a) The executive director or the executive director's designee
shall prepare and maintain a written policy statement to ensure
implementation of a program of equal employment opportunity under
which all personnel transactions are made without regard to race,
color, disability, sex, religion, age, or national origin.
(b) The policy statement under Subsection (a) must include:
(1) personnel policies, including policies related to
recruitment, evaluation, selection, appointment, training, and
promotion of personnel, that are in compliance with the requirements
of Chapter 21, Labor Code;
(2) a comprehensive analysis of the commission workforce
that meets federal and state guidelines;
(3) procedures by which a determination can be made about
the extent of underuse in the commission workforce of all persons for
whom federal or state guidelines encourage a more equitable balance;
and
(4) reasonable methods to appropriately address the
underuse.
(c) A policy statement prepared under Subsection (b) must:
(1) cover an annual period;
(2) be updated at least annually;
(3) be reviewed by the Commission on Human Rights for
compliance with Subsection (b)(1); and
(4) be filed with the governor's office.
(d) The governor's office shall deliver a biennial report to
the legislature based on the information received under Subsection
(c). The report may be made separately or as a part of other
biennial reports to the legislature.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 12.107. CRIMINAL HISTORY CHECKS FOR CERTAIN EMPLOYEES.

Before hiring a person as an employee, the commission may obtain from
the Department of Public Safety or a private vendor all criminal
history record information relating to the prospective employee.

Added by Acts 2023, 88th Leg., R.S., Ch. 154 (S.B. 1112), Sec. 2, eff.

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September 1, 2023.

SUBCHAPTER D. PROHIBITED RELATIONSHIPS AND ACTIVITIES

Sec. 12.151. REGISTERED LOBBYIST. A person required to
register as a lobbyist under Chapter 305, Government Code, because of
the person's activities for compensation on behalf of a profession
related to the operation of the commission may not serve as a
commissioner.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 405, Sec. 4, eff. Sept. 1, 1999.

Sec. 12.152. CONFLICT OF INTEREST. (a) A person is not

eligible for appointment as a commissioner or executive director of
the commission if:
(1) the person serves on the board of directors of a
company that supplies fuel, utility-related services, or utility-
related products to regulated or unregulated electric or
telecommunications utilities; or
(2) the person or the person's spouse:
(A) is employed by or participates in the management of
a business entity or other organization that is regulated by or
receives funds from the commission;
(B) directly or indirectly owns or controls more than a
10 percent interest in:
(i) a business entity or other organization that is
regulated by or receives funds from the commission; or
(ii) a utility competitor, utility supplier, or
other entity affected by a commission decision in a manner other than
by the setting of rates for that class of customer;
(C) uses or receives a substantial amount of tangible
goods, services, or funds from the commission, other than
compensation or reimbursement authorized by law for commission
membership, attendance, or expenses; or
(D) notwithstanding Paragraph (B), has an interest in a
mutual fund or retirement fund in which more than 10 percent of the
fund's holdings at the time of appointment is in a single utility,
utility competitor, or utility supplier in this state and the person

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does not disclose this information to the governor, senate,

commission, or other entity, as appropriate.
(b) A person otherwise ineligible because of Subsection
(a)(2)(B) may be appointed to the commission and serve as a
commissioner or may be employed as executive director if the person:
(1) notifies the attorney general and commission that the
person is ineligible because of Subsection (a)(2)(B); and
(2) divests the person or the person's spouse of the
ownership or control:
(A) before beginning service or employment; or
(B) if the person is already serving or employed,
within a reasonable time.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 405, Sec. 4, eff. Sept. 1, 1999.
Amended by:
Acts 2013, 83rd Leg., R.S., Ch. 170 (H.B. 1600), Sec. 1.03, eff.
September 1, 2013.

Sec. 12.153. RELATIONSHIP WITH TRADE ASSOCIATION. A person may

not serve as a commissioner or be a commission employee who is
employed in a "bona fide executive, administrative, or professional
capacity," as that phrase is used for purposes of establishing an
exemption to the overtime provisions of the federal Fair Labor
Standards Act of 1938 (29 U.S.C. Section 201 et seq.), if the person
is:
(1) an officer, employee, or paid consultant of a trade
association; or
(2) the spouse of an officer, manager, or paid consultant
of a trade association.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2005, 79th Leg., Ch. 797 (S.B. 408), Sec. 4, eff. September
1, 2005.

Sec. 12.154. PROHIBITED ACTIVITIES. (a) During the period of

service with the commission, a commissioner or commission employee
may not:

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(1) have a pecuniary interest, including an interest as an

officer, director, partner, owner, employee, attorney, or consultant,
in:
(A) a public utility or affiliate; or
(B) a person a significant portion of whose business
consists of furnishing goods or services to public utilities or
affiliates; or
(2) accept a gift, gratuity, or entertainment from:
(A) a public utility, affiliate, or direct competitor
of a public utility;
(B) a person a significant portion of whose business
consists of furnishing goods or services to public utilities,
affiliates, or direct competitors of public utilities; or
(C) an agent, representative, attorney, employee,
officer, owner, director, or partner of a person described by
Paragraph (A) or (B).
(b) A commissioner or a commission employee may not directly or
indirectly solicit, request from, or suggest or recommend to a public
utility or an agent, representative, attorney, employee, officer,
owner, director, or partner of a public utility the appointment to a
position or the employment of a person by the public utility or
affiliate.
(c) A person may not give or offer to give a gift, gratuity,
employment, or entertainment to a commissioner or commission employee
if that person is:
(1) a public utility, affiliate, or direct competitor of a
public utility;
(2) a person who furnishes goods or services to a public
utility, affiliate, or direct competitor of a public utility; or
(3) an agent, representative, attorney, employee, officer,
owner, director, or partner of a person described by Subdivision (1)
or (2).
(d) A public utility, affiliate, or direct competitor of a
public utility or a person furnishing goods or services to a public
utility, affiliate, or direct competitor of a public utility may not
aid, abet, or participate with a commissioner, commission employee,
or former commission employee in conduct that violates Subsection
(a)(3) or (c).
(e) Subsection (a)(1) does not apply to an interest in a
nonprofit group or association, other than a trade association, that

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is solely supported by gratuitous contributions of money, property,

or services.
(f) It is not a violation of this section if a commissioner or
commission employee, on becoming the owner of stocks, bonds, or
another pecuniary interest in a public utility, affiliate, or direct
competitor of a public utility otherwise than voluntarily, informs
the commission and the attorney general of the ownership and divests
the ownership or interest within a reasonable time.
(g) It is not a violation of this section if a pecuniary
interest is held indirectly by ownership of an interest in a
retirement system, institution, or fund that in the normal course of
business invests in diverse securities independently of the control
of the commissioner or commission employee.
(h) This section does not apply to a contract for a public
utility product or service or equipment for use of a public utility
product when a commissioner or commission employee is acting as a
consumer.
(i) In this section, a "pecuniary interest" includes income,
compensation, and payment of any kind, in addition to an ownership
interest.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2013, 83rd Leg., R.S., Ch. 170 (H.B. 1600), Sec. 1.04, eff.
September 1, 2013.

Sec. 12.155. PROHIBITION ON EMPLOYMENT OR REPRESENTATION. (a)

A commissioner, a commission employee, or an employee of the State
Office of Administrative Hearings involved in hearing utility cases
may not:
(1) be employed by a public utility that was in the scope
of the commissioner's or employee's official responsibility while the
commissioner or employee was associated with the commission or the
State Office of Administrative Hearings; or
(2) represent a person before the commission or State
Office of Administrative Hearings or a court in a matter:
(A) in which the commissioner or employee was
personally involved while associated with the commission or State
Office of Administrative Hearings; or

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 UTILITIES CODE

(B) that was within the commissioner's or employee's

official responsibility while the commissioner or employee was
associated with the commission or State Office of Administrative
Hearings.
(b) The prohibition of Subsection (a)(1) applies until the:
(1) second anniversary of the date the commissioner ceases
to serve as a commissioner; and
(2) first anniversary of the date the employee's employment
with the commission or State Office of Administrative Hearings
ceases.
(c) The prohibition of Subsection (a)(2) applies while a
commissioner, commission employee, or employee of the State Office of
Administrative Hearings involved in hearing utility cases is
associated with the commission or State Office of Administrative
Hearings and at any time after.
(d) A commissioner may not be employed by an independent
organization certified under Section 39.151. The prohibition under
this subsection applies until the second anniversary of the date the
commissioner ceases to serve as a commissioner.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2013, 83rd Leg., R.S., Ch. 170 (H.B. 1600), Sec. 1.05, eff.
September 1, 2013.

Sec. 12.156. QUALIFICATIONS AND STANDARDS OF CONDUCT

INFORMATION. The executive director or the executive director's
designee shall provide to commissioners and commission employees as
often as necessary information regarding their:
(1) qualifications for office or employment under this
title; and
(2) responsibilities under applicable laws relating to
standards of conduct for state officers and employees.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER E. PUBLIC INTEREST INFORMATION AND REPORTS

Sec. 12.201. PUBLIC INTEREST INFORMATION. (a) The commission
shall prepare information of public interest describing the functions

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of the commission and the commission's procedures by which a

complaint is filed with and resolved by the commission. The
commission shall make the information available to the public and
appropriate state agencies.
(b) The commission by rule shall establish methods by which
consumers and service recipients are notified of the name, mailing
address, and telephone number of the commission for the purpose of
directing complaints to the commission.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 12.202. PUBLIC PARTICIPATION. (a) The commission shall

develop and implement policies that provide the public with a
reasonable opportunity to appear before the commission and to speak
on any issue under the jurisdiction of the commission.
(a-1) The policies adopted under this section must require the
agenda for each regular commission meeting to include public
testimony as a meeting agenda item and allow members of the public to
comment on:
(1) each meeting agenda item unrelated to a contested case;
and
(2) other matters under the commission's jurisdiction.
(a-2) The commission may prohibit public comment at a regular
commission meeting on a meeting agenda item related to a contested
case.
(b) The commission shall comply with federal and state laws
related to program and facility accessibility.
(c) The commission shall prepare and maintain a written plan
that describes how a person who does not speak English may be
provided reasonable access to the commission's programs and services.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2023, 88th Leg., R.S., Ch. 410 (H.B. 1500), Sec. 3, eff.
September 1, 2023.

Sec. 12.203. BIENNIAL REPORT. (a) Not later than January 15

of each odd-numbered year, the commission shall prepare a written
report that includes:

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(1) suggestions regarding modification and improvement of

the commission's statutory authority and for the improvement of
utility regulation in general, including the regulation of water and
sewer service under Chapter 13, Water Code, that the commission
considers appropriate for protecting and furthering the interest of
the public;
(2) a report on the scope of competition in the electric
and telecommunications markets that includes:
(A) an assessment of:
(i) the effect of competition and industry
restructuring on customers in both competitive and noncompetitive
electric markets; and
(ii) the effect of competition on the rates and
availability of electric services for residential and small
commercial customers;
(B) an assessment of the effect of competition on:
(i) customers in both competitive and
noncompetitive telecommunications markets, with a specific focus on
rural markets; and
(ii) the rates and availability of
telecommunications services for residential and business customers,
including any effects on universal service; and
(C) a summary of commission action over the preceding
two years that reflects changes in the scope of competition in
regulated electric and telecommunications markets; and
(3) recommendations for legislation that the commission
determines appropriate to promote the public interest in the context
of partially competitive electric and telecommunications markets.
(b) A telecommunications utility, as defined by Section 51.002,
shall cooperate with the commission as necessary for the commission
to satisfy the requirements of this section.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2013, 83rd Leg., R.S., Ch. 1312 (S.B. 59), Sec. 94, eff.
September 1, 2013.
Acts 2023, 88th Leg., R.S., Ch. 410 (H.B. 1500), Sec. 4, eff.
September 1, 2023.

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Sec. 12.204. INTERNET FOR HEARINGS AND MEETINGS. The

commission shall make publicly accessible without charge live
Internet video of all public hearings and meetings the commission
holds for viewing from the Internet website found at
[Link] The commission may recover the costs of
administering this section by imposing an assessment against a:
(1) public utility;
(2) corporation described by Section 32.053;
(3) retail electric provider that serves more than 250,000
customers; or
(4) power generation company that owns more than 5,000
megawatts of installed capacity in this state.

Added by Acts 2009, 81st Leg., R.S., Ch. 400 (H.B. 1783), Sec. 1, eff.
September 1, 2009.

Sec. 12.205. STRATEGIC COMMUNICATIONS PLAN. The commission

shall:
(1) develop an agency-wide plan for:
(A) improving the effectiveness of commission
communications with the public, market participants, and other
relevant audiences; and
(B) responding to changing communications needs;
(2) include in the plan required by Subdivision (1) goals,
objectives, and metrics to assess commission efforts; and
(3) update the plan required by Subdivision (1) at least
once every two years.

Added by Acts 2023, 88th Leg., R.S., Ch. 410 (H.B. 1500), Sec. 5, eff.
September 1, 2023.

SUBCHAPTER F. HISTORICALLY UNDERUTILIZED BUSINESSES

Sec. 12.251. DEFINITION. In this subchapter, "historically
underutilized business" has the meaning assigned by Section 481.101,
Government Code.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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 UTILITIES CODE

Sec. 12.252. COMMISSION AUTHORITY. The commission, after

notice and hearing, may require each utility subject to regulation
under this title to make an effort to overcome the underuse of
historically underutilized businesses.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 12.253. REPORT REQUIRED. The commission shall require

each utility subject to regulation under this title to prepare and
submit to the commission a comprehensive annual report detailing its
use of historically underutilized businesses.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 12.254. DISCRIMINATION PROHIBITED. The rules adopted

under this subchapter may not be used to discriminate against a
citizen on the basis of sex, race, color, creed, or national origin.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 12.255. CAUSE OF ACTION NOT CREATED. This subchapter does

not create a public or private cause of action.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

CHAPTER 13. OFFICE OF PUBLIC UTILITY COUNSEL

SUBCHAPTER A. GENERAL PROVISIONS; POWERS AND DUTIES
Sec. 13.001. OFFICE OF PUBLIC UTILITY COUNSEL. The independent
office of public utility counsel represents the interests of
residential and small commercial consumers.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 13.002. APPLICATION OF SUNSET ACT. The Office of Public

Utility Counsel is subject to Chapter 325, Government Code (Texas
Sunset Act). Unless continued in existence as provided by that

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chapter, the office is abolished September 1, 2029.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 405, Sec. 5, eff. Sept. 1, 1999; Acts
1999, 76th Leg., ch. 1212, Sec. 2, eff. Sept. 1, 1999.
Amended by:
Acts 2005, 79th Leg., Ch. 300 (S.B. 409), Sec. 1, eff. September
1, 2005.
Acts 2011, 82nd Leg., R.S., Ch. 1232 (S.B. 652), Sec. 6.02, eff.
June 17, 2011.
Acts 2019, 86th Leg., R.S., Ch. 596 (S.B. 619), Sec. 3.08, eff.
June 10, 2019.
Acts 2021, 87th Leg., R.S., Ch. 850 (S.B. 713), Sec. 1.07, eff.
June 16, 2021.
Acts 2023, 88th Leg., R.S., Ch. 410 (H.B. 1500), Sec. 6, eff.
September 1, 2023.

Sec. 13.003. OFFICE POWERS AND DUTIES. (a) The office:

(1) shall assess the effect of utility rate changes and
other regulatory actions on residential consumers in this state;
(2) shall advocate in the office's own name a position
determined by the counsellor to be most advantageous to a substantial
number of residential consumers;
(3) may appear or intervene, as a party or otherwise, as a
matter of right on behalf of:
(A) residential consumers, as a class, in any
proceeding before the commission, including an alternative dispute
resolution proceeding; and
(B) small commercial consumers, as a class, in any
proceeding in which the counsellor determines that small commercial
consumers are in need of representation, including an alternative
dispute resolution proceeding;
(4) may initiate or intervene as a matter of right or
otherwise appear in a judicial proceeding:
(A) that involves an action taken by an administrative
agency in a proceeding, including an alternative dispute resolution
proceeding, in which the counsellor is authorized to appear; or
(B) in which the counsellor determines that residential
electricity consumers or small commercial electricity consumers are

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 UTILITIES CODE

in need of representation;
(5) is entitled to the same access as a party, other than
commission staff, to records gathered by the commission under Section
14.204;
(6) is entitled to discovery of any nonprivileged matter
that is relevant to the subject matter of a proceeding or petition
before the commission;
(7) may represent an individual residential or small
commercial consumer with respect to the consumer's disputed complaint
concerning utility services that is unresolved before the commission;
(8) may recommend legislation to the legislature that the
office determines would positively affect the interests of
residential and small commercial consumers; and
(9) may advise persons who are interested parties for
purposes of Section 37.054 on procedural matters related to
proceedings before the commission on an application for a certificate
of convenience and necessity filed under Section 37.053.
(b) This section does not limit the authority of the commission
to represent residential or small commercial consumers.
(c) The appearance of the counsellor in a proceeding does not
preclude the appearance of other parties on behalf of residential or
small commercial consumers. The counsellor may not be grouped with
any other party.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 405, Sec. 6, eff. Sept. 1, 1999.
Amended by:
Acts 2011, 82nd Leg., R.S., Ch. 416 (S.B. 855), Sec. 1, eff. June
17, 2011.

Sec. 13.004. ALTERNATIVE DISPUTE RESOLUTION PROCEDURES. (a)

The counsellor shall develop and implement a policy to encourage the
use of appropriate alternative dispute resolution procedures under
Chapter 2009, Government Code, to assist in the resolution of
internal disputes under the office's jurisdiction.
(b) The office's procedures relating to alternative dispute
resolution must conform, to the extent possible, to any model
guidelines issued by the State Office of Administrative Hearings for
the use of alternative dispute resolution by state agencies.

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 UTILITIES CODE

(c) The counsellor shall designate a trained person to:

(1) coordinate the implementation of the policy adopted
under Subsection (a);
(2) serve as a resource for any training needed to
implement the procedures for alternative dispute resolution; and
(3) collect data concerning the effectiveness of those
procedures, as implemented by the office.

Added by Acts 2005, 79th Leg., Ch. 300 (S.B. 409), Sec. 2, eff.
September 1, 2005.

Sec. 13.005. COMPLAINTS. (a) The office shall maintain a

system to promptly and efficiently act on complaints filed with the
office that the office has the authority to resolve. The office
shall maintain information about parties to the complaint, the
subject matter of the complaint, a summary of the results of the
review or investigation of the complaint, and its disposition.
(b) The office shall make information available describing its
procedures for complaint investigation and resolution.
(c) The office shall periodically notify the complaint parties
of the status of the complaint until final disposition.

Added by Acts 2005, 79th Leg., Ch. 300 (S.B. 409), Sec. 2, eff.
September 1, 2005.

Sec. 13.006. TECHNOLOGY POLICY. The counsellor shall implement

a policy requiring the office to use appropriate technological
solutions to improve the office's ability to perform its functions.
The policy must ensure that the public is able to interact with the
office on the Internet.

Added by Acts 2005, 79th Leg., Ch. 300 (S.B. 409), Sec. 2, eff.
September 1, 2005.

SUBCHAPTER B. PUBLIC UTILITY COUNSEL

Sec. 13.021. APPOINTMENT; TERM. (a) The chief executive of
the office is the counsellor.
(b) The counsellor is appointed by the governor with the advice

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and consent of the senate.

(c) The appointment of the counsellor shall be made without
regard to the race, color, disability, sex, religion, age, or
national origin of the appointee.
(d) The counsellor serves a two-year term that expires on
February 1 of the final year of the term.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 13.022. QUALIFICATIONS. (a) The counsellor must:

(1) be licensed to practice law in this state and a
resident of this state;
(2) have demonstrated a strong commitment to and
involvement in efforts to safeguard the rights of the public; and
(3) possess the knowledge and experience necessary to
practice effectively in utility proceedings.
(b) A person is not eligible for appointment as counsellor if:
(1) the person or the person's spouse:
(A) is employed by or participates in the management of
a business entity or other organization that is regulated by or
receives funds from the commission;
(B) directly or indirectly owns or controls more than a
10 percent interest or a pecuniary interest with a value exceeding
$10,000 in:
(i) a business entity or other organization that is
regulated by or receives funds from the commission or the office; or
(ii) a utility competitor, utility supplier, or
other entity affected by a commission decision in a manner other than
by the setting of rates for that class of customer;
(C) uses or receives a substantial amount of tangible
goods, services, or funds from the commission or the office, other
than compensation or reimbursement authorized by law for service as
counsellor or for commission membership, attendance, or expenses; or
(D) notwithstanding Paragraph (B), has an interest in a
mutual fund or retirement fund in which more than 10 percent of the
fund's holdings is in a single utility, utility competitor, or
utility supplier in this state and the person does not disclose this
information to the governor, senate, or other entity, as appropriate;
or

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(2) the person is not qualified to serve under Section

13.042.
(c) Repealed by Acts 2005, 79th Leg., Ch. 300, Sec. 7, eff.
September 1, 2005.
(d) A person otherwise ineligible because of Subsection
(b)(1)(B) may be appointed and serve as counsellor if the person:
(1) notifies the attorney general and commission that the
person is ineligible because of Subsection (b)(1)(B); and
(2) divests the person or the person's spouse of the
ownership or control:
(A) before beginning service; or
(B) if the person is already serving, within a
reasonable time.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2005, 79th Leg., Ch. 300 (S.B. 409), Sec. 7, eff. September
1, 2005.
Acts 2021, 87th Leg., R.S., Ch. 425 (S.B. 2), Sec. 2, eff. June
8, 2021.

Sec. 13.023. GROUNDS FOR REMOVAL. (a) It is a ground for

removal from office if the counsellor:
(1) does not have at the time of taking office or maintain
during service as counsellor the qualifications required by Section
13.022;
(2) is ineligible for service as counsellor under Section
13.022, 13.042, or 13.043; or
(3) cannot discharge the counsellor's duties for a
substantial part of the term for which the counsellor is appointed
because of illness or disability.
(b) The validity of an action of the office is not affected by
the fact that the action is taken when a ground for removal of the
counsellor exists.
(c) If an employee has knowledge that a potential ground for
removal of the counsellor exists, the employee shall notify the next
highest ranking employee of the office, other than the counsellor,
who shall then notify the governor and the attorney general that a
potential ground for removal exists.

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Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2005, 79th Leg., Ch. 300 (S.B. 409), Sec. 3, eff. September
1, 2005.

Sec. 13.024. PROHIBITED ACTS. (a) The counsellor may not have
a direct or indirect interest in a utility company regulated under
this title, its parent, or its subsidiary companies, corporations, or
cooperatives or a utility competitor, utility supplier, or other
entity affected in a manner other than by the setting of rates for
that class of customer.
(b) The prohibition under Subsection (a) applies during the
period of the counsellor's service.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 405, Sec. 7, eff. Sept. 1, 1999.

SUBCHAPTER C. OFFICE PERSONNEL

Sec. 13.041. PERSONNEL. (a) The counsellor may employ
lawyers, economists, engineers, consultants, statisticians,
accountants, clerical staff, and other employees as the counsellor
considers necessary to carry out this chapter.
(b) An employee receives compensation as prescribed by the
legislature from the assessment imposed by Subchapter A, Chapter 16.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 13.042. CONFLICT OF INTEREST. (a) In this section,

"Texas trade association" means a cooperative and voluntarily joined
statewide association of business or professional competitors in this
state designed to assist its members and its industry or profession
in dealing with mutual business or professional problems and in
promoting their common interest.
(b) A person may not serve as counsellor or be an employee of
the office employed in a "bona fide executive, administrative, or
professional capacity," as that phrase is used for purposes of
establishing an exemption to the overtime provisions of the federal
Fair Labor Standards Act of 1938 (29 U.S.C. Section 201 et seq.) if

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the person is:

(1) an officer, employee, or paid consultant of a Texas
trade association in the field of utilities; or
(2) the spouse of an officer, manager, or paid consultant
of a Texas trade association in the field of utilities.
(c) A person may not serve as counsellor or act as the general
counsel to the office if the person is required to register as a
lobbyist under Chapter 305, Government Code, because of the person's
activities for compensation on behalf of a profession related to the
operation of the office.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2005, 79th Leg., Ch. 300 (S.B. 409), Sec. 4, eff. September
1, 2005.

Sec. 13.043. PROHIBITION ON EMPLOYMENT OR REPRESENTATION. (a)

A former counsel may not make any communication to or appearance
before the commission or an officer or employee of the commission
before the second anniversary of the date the person ceases to serve
as counsel if the communication or appearance is made:
(1) on behalf of another person in connection with any
matter on which the person seeks official action; or
(2) with the intent to influence a commission decision or
action, unless acting on his or her own behalf and without
remuneration.
(b) A former counsel may not represent any person or receive
compensation for services rendered on behalf of any person regarding
a matter before the commission before the second anniversary of the
date the person ceases to serve as counsel.
(c) A person commits an offense if the person violates this
section. An offense under this subsection is a Class A misdemeanor.
(d) An employee of the office may not:
(1) be employed by a public utility that was in the scope
of the employee's official responsibility while the employee was
associated with the office; or
(2) represent a person before the commission or a court in
a matter:
(A) in which the employee was personally involved while

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associated with the office; or

(B) that was within the employee's official
responsibility while the employee was associated with the office.
(e) The prohibition of Subsection (d)(1) applies until the
first anniversary of the date the employee's employment with the
office ceases.
(f) The prohibition of Subsection (d)(2) applies while an
employee of the office is associated with the office and at any time
after.
(g) For purposes of this section, "person" includes an electric
cooperative.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 405, Sec. 8, eff. Sept. 1, 1999.

Sec. 13.044. CAREER LADDER PROGRAM; PERFORMANCE EVALUATIONS;

MERIT PAY. (a) The counsellor or the counsellor's designee shall
develop an intra-agency career ladder program that addresses
opportunities for mobility and advancement for office employees. The
program shall require intra-agency postings of each position
concurrently with any public posting.
(b) The counsellor or the counsellor's designee shall develop a
system of annual performance evaluations that are based on documented
employee performance. Merit pay for office employees must be based
on the system established under this subsection.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 13.045. EQUAL EMPLOYMENT OPPORTUNITY POLICY STATEMENT.

(a) The counsellor or the counsellor's designee shall prepare and
maintain a written policy statement to ensure implementation of a
program of equal employment opportunity under which all personnel
transactions are made without regard to race, color, disability, sex,
religion, age, or national origin.
(b) The policy statement under Subsection (a) must include:
(1) personnel policies, including policies related to
recruitment, evaluation, selection, appointment, training, and
promotion of personnel, that are in compliance with the requirements
of Chapter 21, Labor Code;

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(2) a comprehensive analysis of the office workforce that

meets federal and state guidelines;
(3) procedures by which a determination can be made about
the extent of underuse in the office workforce of all persons for
whom federal or state guidelines encourage a more equitable balance;
and
(4) reasonable methods to appropriately address the
underuse.
(c) A policy statement prepared under Subsection (b) must:
(1) cover an annual period;
(2) be updated at least annually;
(3) be reviewed by the Commission on Human Rights for
compliance with Subsection (b)(1); and
(4) be filed with the governor's office.
(d) The governor's office shall deliver a biennial report to
the legislature based on the information received under Subsection
(c). The report may be made separately or as a part of other
biennial reports to the legislature.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 13.046. QUALIFICATIONS AND STANDARDS OF CONDUCT

INFORMATION. The office shall provide to office employees as often
as necessary information regarding their:
(1) qualifications for employment under this title; and
(2) responsibilities under applicable laws relating to
standards of conduct for employees.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER D. PUBLIC INTEREST INFORMATION AND REPORTS

Sec. 13.061. PUBLIC INTEREST INFORMATION. The office shall
prepare information of public interest describing the functions of
the office. The office shall make the information available to the
public and appropriate state agencies.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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Sec. 13.062. PUBLIC PARTICIPATION. (a) The office shall

comply with federal and state laws related to program and facility
accessibility.
(b) The office shall prepare and maintain a written plan that
describes how a person who does not speak English may be provided
reasonable access to the office's programs and services.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 13.063. ANNUAL REPORT. The office shall prepare annually

a report on the office's activities during the preceding year and
submit the report to the standing legislative committees that have
jurisdiction over the office, the house appropriations committee, and
the senate finance committee. At a minimum, the report must include:
(1) a list of the types of activities conducted by the
office and the time spent by the office on each activity;
(2) the number of hours billed by the office for
representing residential or small commercial consumers in
proceedings;
(3) the number of staff positions and the type of work
performed by each position; and
(4) the office's rate of success in representing
residential or small commercial consumers in appealing commission
decisions.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2005, 79th Leg., Ch. 300 (S.B. 409), Sec. 5, eff. September
1, 2005.
Acts 2011, 82nd Leg., R.S., Ch. 1083 (S.B. 1179), Sec. 25(161),
eff. June 17, 2011.
Acts 2019, 86th Leg., R.S., Ch. 573 (S.B. 241), Sec. 1.44, eff.
September 1, 2019.

Sec. 13.064. PUBLIC HEARING. (a) The office annually shall

conduct a public hearing to assist the office in developing a plan of
priorities and to give the public, including residential and small
commercial consumers, an opportunity to comment on the office's
functions and effectiveness.

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(b) A public hearing held under this section is not subject to

Chapter 551, Government Code.
(c) The office shall file notice of a public hearing held under
this section with the secretary of state for publication in the Texas
Register.

Added by Acts 2005, 79th Leg., Ch. 300 (S.B. 409), Sec. 6, eff.
September 1, 2005.

CHAPTER 14. JURISDICTION AND POWERS OF COMMISSION AND OTHER

REGULATORY AUTHORITIES
SUBCHAPTER A. GENERAL POWERS OF COMMISSION
Sec. 14.001. POWER TO REGULATE AND SUPERVISE. The commission
has the general power to regulate and supervise the business of each
public utility within its jurisdiction and to do anything
specifically designated or implied by this title that is necessary
and convenient to the exercise of that power and jurisdiction.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 14.002. RULES. The commission shall adopt and enforce

rules reasonably required in the exercise of its powers and
jurisdiction.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 14.0025. NEGOTIATED RULEMAKING AND ALTERNATIVE DISPUTE

RESOLUTION. (a) The commission shall develop and implement a policy
to encourage the use of:
(1) negotiated rulemaking procedures under Chapter 2008,
Government Code, for the adoption of commission rules; and
(2) appropriate alternative dispute resolution procedures
under Chapter 2009, Government Code, to assist in the resolution of
internal and external disputes under the commission's jurisdiction.
(b) The commission's procedures relating to alternative dispute
resolution must conform, to the extent possible, to any model
guidelines issued by the State Office of Administrative Hearings for
the use of alternative dispute resolution by state agencies.

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(c) The commission shall designate a trained person to:

(1) coordinate the implementation of the policy adopted
under Subsection (a);
(2) serve as a resource for any training needed to
implement the procedures for negotiated rulemaking or alternative
dispute resolution; and
(3) collect data concerning the effectiveness of those
procedures, as implemented by the commission.

Added by Acts 2005, 79th Leg., Ch. 797 (S.B. 408), Sec. 5, eff.
September 1, 2005.

Sec. 14.003. COMMISSION POWERS RELATING TO REPORTS. The

commission may:
(1) require a public utility to report to the commission
information relating to:
(A) the utility; and
(B) a transaction between the utility and an affiliate
inside or outside this state, to the extent that the transaction is
subject to the commission's jurisdiction;
(2) establish the form for a report;
(3) determine the time for a report and the frequency with
which the report is to be made;
(4) require that a report be made under oath;
(5) require the filing with the commission of a copy of:
(A) a contract or arrangement between a public utility
and an affiliate;
(B) a report filed with a federal agency or a
governmental agency or body of another state; and
(C) an annual report that shows each payment of
compensation, other than salary or wages subject to federal income
tax withholding:
(i) to residents of this state;
(ii) with respect to legal, administrative, or
legislative matters in this state; or
(iii) for representation before the legislature of
this state or any governmental agency or body; and
(6) require that a contract or arrangement described by
Subdivision (5)(A) that is not in writing be reduced to writing and

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filed with the commission.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 14.004. REPORT OF SUBSTANTIAL INTEREST. The commission

may require disclosure of the identity and respective interests of
each owner of at least one percent of the voting securities of a
public utility or its affiliate.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 14.005. CRITERIA AND GUIDELINES GOVERNING TERMINATION OF

SERVICES TO ELDERLY AND DISABLED. The commission may establish
criteria and guidelines with the utility industry relating to
industry procedures used in terminating services to the elderly and
disabled.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 14.006. INTERFERENCE WITH TERMS OR CONDITIONS OF

EMPLOYMENT; PRESUMPTION OF REASONABLENESS. The commission may not
interfere with employee wages and benefits, working conditions, or
other terms or conditions of employment that are the product of a
collective bargaining agreement recognized under federal law. An
employee wage rate or benefit that is the product of the collective
bargaining is presumed to be reasonable.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 14.007. ASSISTANCE TO MUNICIPALITY. On request by the

governing body of a municipality, the commission may provide
commission employees as necessary to advise and consult with the
municipality on a pending matter.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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Sec. 14.008. MUNICIPAL FRANCHISES. (a) This title does not

restrict the rights and powers of a municipality to grant or refuse a
franchise to use the streets and alleys in the municipality or to
make a statutory charge for that use.
(b) A franchise agreement may not limit or interfere with a
power conferred on the commission by this title.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER B. PRACTICE AND PROCEDURE

Sec. 14.051. PROCEDURAL POWERS. The commission may:
(1) call and hold a hearing;
(2) administer an oath;
(3) receive evidence at a hearing;
(4) issue a subpoena to compel the attendance of a witness
or the production of a document; and
(5) make findings of fact and decisions to administer this
title or a rule, order, or other action of the commission.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 14.052. RULES. (a) The commission shall adopt and

enforce rules governing practice and procedure before the commission
and, as applicable, practice and procedure before the State Office of
Administrative Hearings.
(b) The commission shall adopt rules that authorize an
administrative law judge to:
(1) limit the amount of time that a party may have to
present its case;
(2) limit the number of requests for information that a
party may make in a contested case;
(3) require a party to a contested case to identify
contested issues and facts before the hearing begins;
(4) limit cross-examination to only those issues and facts
identified before the hearing and to any new issues that may arise as
a result of the discovery process; and
(5) group parties, other than the office, that have the
same position on an issue to facilitate cross-examination on that
issue.

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(c) A rule adopted under Subsection (b)(5) must permit each

party in a group to present that party's witnesses for cross-
examination during the hearing.
(d) A rule adopted under this section must ensure that each
party receives due process.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2015, 84th Leg., R.S., Ch. 228 (H.B. 2154), Sec. 23, eff.
September 1, 2015.

Sec. 14.053. POWERS AND DUTIES OF STATE OFFICE OF

ADMINISTRATIVE HEARINGS. (a) The State Office of Administrative
Hearings shall conduct each hearing in a contested case that is not
conducted by one or more commissioners.
(b) The commission may delegate to the State Office of
Administrative Hearings the authority to make a final decision and to
issue findings of fact, conclusions of law, and other necessary
orders in a proceeding in which there is not a contested issue of
fact or law.
(c) The commission by rule shall define the procedures by which
it delegates final decision-making authority under Subsection (b).
(d) For review purposes an administrative law judge's final
decision under Subsection (b) has the same effect as a final decision
of the commission unless a commissioner requests formal review of the
decision.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2015, 84th Leg., R.S., Ch. 228 (H.B. 2154), Sec. 24, eff.
September 1, 2015.

Sec. 14.054. SETTLEMENTS. (a) The commission by rule shall

adopt procedures governing the use of settlements to resolve
contested cases.
(b) Rules adopted under this section must ensure that:
(1) each party retains the right to:
(A) a full hearing before the commission on issues that
remain in dispute; and

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(B) judicial review of issues that remain in dispute;

(2) an issue of fact raised by a nonsettling party may not
be waived by a settlement or stipulation of the other parties; and
(3) a nonsettling party may use an issue of fact raised by
that party as the basis for judicial review.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 14.055. RECORD OF PROCEEDINGS. The regulatory authority

shall keep a record of each proceeding before the authority.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 14.056. RIGHT TO BE HEARD. Each party to a proceeding

before a regulatory authority is entitled to be heard by attorney or
in person.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 14.057. ORDERS OF COMMISSION; TRANSCRIPTS AND EXHIBITS;

PUBLIC RECORDS. (a) A commission order must be in writing and
contain detailed findings of the facts on which it is passed.
(b) The commission shall retain a copy of the transcript and
the exhibits in any matter in which the commission issues an order.
(c) Subject to Chapter 552, Government Code, each file
pertaining to a matter that was at any time pending before the
commission or to a record, report, or inspection required by Section
14.003, 14.151, 14.152, 14.153, 14.201, or 14.203-14.207 or by
Subtitle B or C is public information.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 14.058. FEES FOR ELECTRONIC ACCESS TO INFORMATION. The

fees charged by the commission for electronic access to information
that is stored in the system established by the commission using
funds from the Texas Public Finance Authority and approved by the
Department of Information Resources shall be established:

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(1) by the commission in consultation with the comptroller;

and
(2) in an amount reasonable and necessary to retire the
debt to the Texas Public Finance Authority associated with
establishing the electronic access system.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 18.01(a), eff. Sept. 1,
1999.
Amended by:
Acts 2007, 80th Leg., R.S., Ch. 937 (H.B. 3560), Sec. 1.115, eff.
September 1, 2007.

Sec. 14.059. TECHNOLOGY POLICY. The commission shall implement

a policy requiring the commission to use appropriate technological
solutions to improve the commission's ability to perform its
functions. The policy must ensure that the public is able to
interact with the commission on the Internet.

Added by Acts 2005, 79th Leg., Ch. 797 (S.B. 408), Sec. 6, eff.
September 1, 2005.

SUBCHAPTER C. RESTRICTIONS ON CERTAIN TRANSACTIONS

Sec. 14.101. REPORT OF CERTAIN TRANSACTIONS; COMMISSION
CONSIDERATION. (a) Unless a public utility reports the transaction
to the commission within a reasonable time, the public utility may
not:
(1) sell, acquire, or lease a plant as an operating unit or
system in this state for a total consideration of more than $10
million; or
(2) merge or consolidate with another public utility
operating in this state.
(b) A public utility shall report to the commission within a
reasonable time each transaction that involves the sale of at least
50 percent of the stock of the utility. On the filing of a report
with the commission, the commission shall investigate the
transaction, with or without a public hearing, to determine whether
the action is consistent with the public interest. In reaching its
determination, the commission shall consider:
(1) the reasonable value of the property, facilities, or

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securities to be acquired, disposed of, merged, transferred, or

consolidated;
(2) whether the transaction will:
(A) adversely affect the health or safety of customers
or employees;
(B) result in the transfer of jobs of citizens of this
state to workers domiciled outside this state; or
(C) result in the decline of service;
(3) whether the public utility will receive consideration
equal to the reasonable value of the assets when it sells, leases, or
transfers assets; and
(4) whether the transaction is consistent with the public
interest.
(c) If the commission finds that a transaction is not in the
public interest, the commission shall take the effect of the
transaction into consideration in ratemaking proceedings and disallow
the effect of the transaction if the transaction will unreasonably
affect rates or service.
(d) This section does not apply to:
(1) the purchase of a unit of property for replacement;
(2) an addition to the facilities of a public utility by
construction; or
(3) transactions that facilitate unbundling, asset
valuation, minimization of ownership or control of generation assets,
or other purposes consistent with Chapter 39.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 405, Sec. 9, eff. Sept. 1, 1999.
Amended by:
Acts 2011, 82nd Leg., R.S., Ch. 129 (H.B. 1753), Sec. 1, eff.
September 1, 2011.

Sec. 14.102. REPORT OF PURCHASE OF VOTING STOCK IN PUBLIC

UTILITY. A public utility may not purchase voting stock in another
public utility doing business in this state unless the utility
reports the purchase to the commission.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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Sec. 14.103. REPORT OF LOAN TO STOCKHOLDERS. A public utility

may not loan money, stocks, bonds, notes, or other evidence of
indebtedness to a person who directly or indirectly owns or holds any
stock of the public utility unless the public utility reports the
transaction to the commission within a reasonable time.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER D. RECORDS
Sec. 14.151. RECORDS OF PUBLIC UTILITY. (a) Each public
utility shall keep and provide to the regulatory authority, in the
manner and form prescribed by the commission, uniform accounts of all
business transacted by the utility.
(b) The commission may prescribe the form of books, accounts,
records, and memoranda to be kept by a public utility, including:
(1) the books, accounts, records, and memoranda of:
(A) the provision of and capacity for service; and
(B) the receipt and expenditure of money; and
(2) any other form, record, and memorandum that the
commission considers necessary to carry out this title.
(c) For a public utility subject to regulation by a federal
regulatory agency, compliance with the system of accounts prescribed
for the particular class of utilities by the federal agency may be
considered sufficient compliance with the system prescribed by the
commission. The commission may prescribe the form of books,
accounts, records, and memoranda covering information in addition to
that required by the federal agency. The system of accounts and the
form of books, accounts, records, and memoranda prescribed by the
commission for a public utility or class of utilities may not be
inconsistent with the systems and forms established by a federal
agency for that public utility or class of utilities.
(d) Each public utility shall:
(1) keep and provide its books, accounts, records, and
memoranda accurately in the manner and form prescribed by the
commission; and
(2) comply with the directions of the regulatory authority
relating to the books, accounts, records, and memoranda.
(e) In this section, "public utility" includes a municipally
owned utility.

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Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 14.152. MAINTENANCE OF OFFICE AND RECORDS IN THIS STATE.

(a) Each public utility shall maintain an office in this state in a
county in which some part of the utility's property is located. The
utility shall keep in this office all books, accounts, records, and
memoranda required by the commission to be kept in this state.
(b) A book, account, record, or memorandum required by the
regulatory authority to be kept in this state may not be removed from
this state, except as:
(1) provided by Section 52.255; and
(2) prescribed by the commission.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 14.153. COMMUNICATIONS WITH REGULATORY AUTHORITY. (a)

The regulatory authority shall adopt rules governing communications
with the regulatory authority or a member or employee of the
regulatory authority by:
(1) a public utility;
(2) an affiliate; or
(3) a representative of a public utility or affiliate.
(b) A record of a communication must contain:
(1) the name of the person contacting the regulatory
authority or member or employee of the regulatory authority;
(2) the name of the business entity represented;
(3) a brief description of the subject matter of the
communication; and
(4) the action, if any, requested by the public utility,
affiliate, or representative.
(c) Records compiled under Subsection (b) shall be available to
the public monthly.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 14.154. JURISDICTION OVER AFFILIATE. (a) The commission

has jurisdiction over an affiliate that has a transaction with a
public utility under the commission's jurisdiction to the extent of

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access to a record of the affiliate relating to the transaction,

including a record of joint or general expenses, any portion of which
may be applicable to the transaction.
(b) A record obtained by the commission relating to sale of
electrical energy at wholesale by an affiliate to the public utility
is confidential and is not subject to disclosure under Chapter 552,
Government Code.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER E. AUDITS AND INSPECTIONS

Sec. 14.201. INQUIRY INTO MANAGEMENT AND AFFAIRS. A regulatory
authority may inquire into the management and affairs of each public
utility and shall keep itself informed as to the manner and method in
which each public utility is managed and its affairs are conducted.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 14.202. MANAGEMENT AUDITS BY COMMISSION. (a) The

commission shall:
(1) inquire into the management of the business of each
public utility under its jurisdiction;
(2) keep itself informed as to the manner and method in
which the utility's business is managed; and
(3) obtain from the public utility any information
necessary to enable the commission to perform a management audit.
(b) The commission may audit a utility under its jurisdiction
as frequently as needed. Six months after an audit, the utility
shall report to the commission on the status of the implementation of
the recommendations of the audit and shall file subsequent reports at
times the commission considers appropriate.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 14.203. AUDIT OF ACCOUNTS. A regulatory authority may

require the examination and audit of the accounts of a public or
municipally owned utility.

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Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 14.204. INSPECTION. (a) A regulatory authority and, to

the extent authorized by the regulatory authority, its counsel,
agent, or employee, may:
(1) inspect and obtain copies of the papers, books,
accounts, documents, and other business records of a public utility
within its jurisdiction; and
(2) inspect the plant, equipment, and other property of a
public utility within its jurisdiction.
(b) An action under this section must be conducted at a
reasonable time for a reasonable purpose.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 14.205. EXAMINATIONS UNDER OATH. In connection with an

action taken under Section 14.204, the regulatory authority may:
(1) examine under oath an officer, agent, or employee of a
public utility; or
(2) authorize the person conducting the action to make the
examination under oath.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 14.206. ENTERING PREMISES OF PUBLIC UTILITY. (a) A

member, agent, or employee of a regulatory authority may enter the
premises occupied by a public utility to conduct an inspection,
examination, or test or to exercise any other authority provided by
this title.
(b) A member, agent, or employee of the regulatory authority
may act under this section only during reasonable hours and after
reasonable notice to the public utility.
(c) A public utility is entitled to be represented when an
inspection, examination, or test is conducted on its premises. The
utility is entitled to a reasonable time to secure a representative
before the inspection, examination, or test begins.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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Sec. 14.207. PRODUCTION OF OUT-OF-STATE RECORDS. (a) A

regulatory authority may require, by order or subpoena served on a
public utility, the production, at the time and place in this state
that the regulatory authority designates, of any books, accounts,
papers, or records kept by that public utility outside this state or,
if ordered by the commission, verified copies of the books, accounts,
papers, or records.
(b) A public utility that fails or refuses to comply with an
order or subpoena under this section violates this title.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

CHAPTER 15. JUDICIAL REVIEW, ENFORCEMENT, AND PENALTIES

SUBCHAPTER A. JUDICIAL REVIEW
Sec. 15.001. RIGHT TO JUDICIAL REVIEW. Any party to a
proceeding before the commission is entitled to judicial review under
the substantial evidence rule.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 15.002. COMMISSION AS DEFENDANT. The commission must be a

defendant in a proceeding for judicial review.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 15.003. COSTS AND ATTORNEY'S FEES. (a) A party

represented by counsel who alleges that existing rates are excessive
or that rates prescribed by the commission are excessive and who
prevails in a proceeding for review of a commission order or decision
is entitled in the same action to recover against the regulation fund
reasonable fees for attorneys and expert witnesses and other costs
for the party's efforts before the commission and the court.
(b) The court shall set the amount of attorney's fees awarded
under Subsection (a).
(c) If a court finds that an action under Section 15.001 or
this section was groundless and brought in bad faith and for the

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purpose of harassment, the court may award reasonable attorney's fees

to the defendant public utility.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 15.004. JUDICIAL STAY OR SUSPENSION. While an appeal of

an order, ruling, or decision of a regulatory authority is pending,
the district court, court of appeals, or supreme court, as
appropriate, may stay or suspend all or part of the operation of the
order, ruling, or decision. In granting or refusing a stay or
suspension, the court shall act in accordance with the practice of a
court exercising equity jurisdiction.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER B. ENFORCEMENT AND PENALTIES

Sec. 15.021. ACTION TO ENJOIN OR REQUIRE COMPLIANCE. (a) The
attorney general, on the request of the commission, shall apply in
the name of the commission for a court order under Subsection (b) if
the commission determines that a public utility or other person is:
(1) engaging in or about to engage in an act that violates
this title or an order or rule of the commission entered or adopted
under this title; or
(2) failing to comply with the requirements of this title
or a rule or order of the commission.
(b) A court, in an action under this section, may:
(1) prohibit the commencement or continuation of an act
that violates this title or an order or rule of the commission
entered or adopted under this title; or
(2) require compliance with a provision of this title or an
order or rule of the commission.
(c) The remedy under this section is in addition to any other
remedy provided under this title.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 15.022. CONTEMPT. The commission may file a court action

for contempt against a person who:

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(1) fails to comply with a lawful order of the commission;

(2) fails to comply with a subpoena or subpoena duces
tecum; or
(3) refuses to testify about a matter on which the person
may be lawfully interrogated.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 15.023. ADMINISTRATIVE PENALTY, DISGORGEMENT ORDER, OR

MITIGATION PLAN. (a) The commission may impose an administrative
penalty against a person regulated under this title who violates this
title or a rule or order adopted under this title.
(b) The penalty for a violation may be in an amount not to
exceed $25,000. Each day a violation continues or occurs is a
separate violation for purposes of imposing a penalty.
(b-1) Notwithstanding Subsection (b), the penalty for a
violation of a voluntary mitigation plan entered into under
Subsection (f) or of a provision of Section 35.0021 or 38.075 may be
in an amount not to exceed $1,000,000 for a violation. Each day a
violation continues or occurs is a separate violation for purposes of
imposing a penalty.
(c) The commission by rule shall establish a classification
system for violations that includes a range of administrative
penalties that may be assessed for each class of violation based on:
(1) the seriousness of the violation, including:
(A) the nature, circumstances, extent, and gravity of a
prohibited act; and
(B) the hazard or potential hazard created to the
health, safety, or economic welfare of the public;
(2) the economic harm to property or the environment caused
by the violation;
(3) the history of previous violations;
(4) the amount necessary to deter future violations;
(5) efforts to correct the violation; and
(6) any other matter that justice may require.
(d) The classification system established under Subsection (c)
shall provide that a penalty in an amount that exceeds $5,000 may be
assessed only if the violation is included in the highest class of
violations in the classification system.

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(e) For a violation of Section 39.157, the commission shall, in

addition to the assessment of a penalty, order disgorgement of all
excess revenue resulting from the violation. For any other violation
of the statutes, rules, or protocols relating to wholesale electric
markets, the commission may, in addition to the assessment of a
penalty, order disgorgement of all excess revenue resulting from the
violation.
(f) The commission and a person may develop and enter into a
voluntary mitigation plan relating to a violation of Section 39.157
or rules adopted by the commission under that section. The
commission may approve the plan only if the commission determines
that the plan is in the public interest. The voluntary mitigation
plan must be reviewed at least once every two years and not later
than the 90th day after the implementation date of a wholesale market
design change. As part of the review, the commission must determine
whether the voluntary mitigation plan remains in the public interest.
If the commission determines that the voluntary mitigation plan is no
longer in the public interest, the commission and the person must
agree to a modification of the plan or the commission must terminate
the plan. Adherence to the plan must be considered in determining
whether a violation occurred and, if so, the penalty to be assessed.
(g) In this subchapter, "excess revenue" means revenue in
excess of revenue that would have occurred absent a violation.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2005, 79th Leg., Ch. 797 (S.B. 408), Sec. 7, eff. September
1, 2005.
Acts 2011, 82nd Leg., R.S., Ch. 996 (H.B. 2133), Sec. 1, eff.
September 1, 2011.
Acts 2011, 82nd Leg., R.S., Ch. 996 (H.B. 2133), Sec. 2, eff.
September 1, 2011.
Acts 2021, 87th Leg., R.S., Ch. 426 (S.B. 3), Sec. 7, eff. June
8, 2021.
Acts 2023, 88th Leg., R.S., Ch. 410 (H.B. 1500), Sec. 7, eff.
September 1, 2023.
Acts 2023, 88th Leg., R.S., Ch. 959 (S.B. 2011), Sec. 1, eff.
September 1, 2023.

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Sec. 15.024. ADMINISTRATIVE PENALTY ASSESSMENT OR DISGORGEMENT

ORDER PROCEDURE. (a) If the executive director determines that a
violation has occurred, the executive director may issue to the
commission a report that states the facts on which the determination
is based and the executive director's recommendation on the
imposition of an administrative penalty, including a recommendation
on the amount of the penalty.
(b) Not later than the 14th day after the date the report is
issued, the executive director shall give written notice of the
report to the person against whom the penalty may be assessed. The
notice may be given by regular or certified mail. The notice must:
(1) include a brief summary of the alleged violation;
(2) state the amount of the recommended penalty; and
(3) inform the person that the person has a right to a
hearing on the occurrence of the violation, the amount of the
penalty, or both the occurrence of the violation and the amount of
the penalty.
(b-1) If the commission sends written notice to a person by
mail addressed to the person's mailing address as maintained in the
commission's records, the person is deemed to have received notice:
(1) on the fifth day after the date that the commission
sent the written notice, for notice sent by regular mail; or
(2) on the date the written notice is received or delivery
is refused, for notice sent by certified mail.
(c) A penalty may not be assessed under this section if the
person against whom the penalty may be assessed remedies the
violation before the 31st day after the date the person receives the
notice under Subsection (b). A person who claims to have remedied an
alleged violation has the burden of proving to the commission that
the alleged violation was remedied and was accidental or inadvertent.
This subsection does not apply to a violation of Chapter 17, 55, or
64.
(d) Not later than the 20th day after the date the person
receives the notice, the person may accept the determination and
recommended penalty of the executive director in writing or may make
a written request for a hearing on the occurrence of the violation,
the amount of the penalty, or both the occurrence of the violation
and the amount of the penalty.
(e) If the person accepts the executive director's
determination and recommended penalty or fails to timely respond to

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the notice, the commission by order shall approve the determination

and impose the recommended penalty or order a hearing on the
determination and the recommended penalty.
(f) If the person requests a hearing or the commission orders a
hearing under Subsection (e), the commission shall refer the matter
to the State Office of Administrative Hearings for a hearing and give
notice of the referral to the person. The parties to a proceeding
under this subchapter shall be limited to the person and the
commission, including the independent market monitor. The hearing
shall be held by an administrative law judge of the State Office of
Administrative Hearings and notice of the hearing must be provided in
accordance with Chapter 2001, Government Code. The administrative
law judge shall make findings of fact and conclusions of law and
promptly issue to the commission a proposal for a decision about the
occurrence of the violation and the amount of a proposed penalty.
Based on the findings of fact, conclusions of law, and proposal for a
decision, the commission by order may find that a violation has
occurred and impose a penalty or disgorgement order or may find that
no violation occurred.
(g) The notice of the commission's order shall be given to the
person as provided by Chapter 2001, Government Code, and must include
a statement of the right of the person to judicial review of the
order.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 1212, Sec. 3, eff. Sept. 1, 1999; Acts
1999, 76th Leg., ch. 1579, Sec. 2, eff. Aug. 30, 1999.
Amended by:
Acts 2011, 82nd Leg., R.S., Ch. 91 (S.B. 1303), Sec. 25.001, eff.
September 1, 2011.
Acts 2011, 82nd Leg., R.S., Ch. 996 (H.B. 2133), Sec. 3, eff.
September 1, 2011.
Acts 2011, 82nd Leg., R.S., Ch. 996 (H.B. 2133), Sec. 4, eff.
September 1, 2011.
Acts 2019, 86th Leg., R.S., Ch. 81 (S.B. 1358), Sec. 1, eff.
September 1, 2019.

Sec. 15.025. PAYMENT OF ADMINISTRATIVE PENALTY. (a) Not later

than the 30th day after the date the commission's order imposing an

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administrative penalty is final as provided by Section 2001.144,

Government Code, the person shall:
(1) pay the amount of the penalty;
(2) pay the amount of the penalty and file a petition for
judicial review contesting:
(A) the occurrence of the violation;
(B) the amount of the penalty; or
(C) both the occurrence of the violation and the amount
of the penalty; or
(3) without paying the amount of the penalty, file a
petition for judicial review contesting:
(A) the occurrence of the violation;
(B) the amount of the penalty; or
(C) both the occurrence of the violation and the amount
of the penalty.
(b) Not later than the 30th day after the date the commission's
order is final as provided by Section 2001.144, Government Code, a
person who acts under Subsection (a)(3) may:
(1) stay enforcement of the penalty by:
(A) paying the amount of the penalty to the court for
placement in an escrow account; or
(B) giving to the court a supersedeas bond that is
approved by the court for the amount of the penalty and that is
effective until all judicial review of the commission's order is
final; or
(2) request the court to stay enforcement of the penalty
by:
(A) filing with the court a sworn affidavit of the
person stating that the person is financially unable to pay the
amount of the penalty and is financially unable to give the
supersedeas bond; and
(B) giving a copy of the affidavit to the executive
director by certified mail.
(c) The executive director, on receipt of a copy of an
affidavit under Subsection (b)(2), may file with the court, not later
than the fifth day after the date the copy is received, a contest to
the affidavit. The court shall hold a hearing on the facts alleged
in the affidavit as soon as practicable and shall stay the
enforcement of the penalty on finding that the alleged facts are
true. The person who files an affidavit has the burden of proving

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that the person is financially unable to pay the amount of the

penalty and to give a supersedeas bond.
(d) If the person does not pay the amount of the penalty and
the enforcement of the penalty is not stayed, the executive director
may refer the matter to the attorney general for collection of the
amount of the penalty.
(e) Any excess revenue ordered disgorged under this section for
a violation of the statutes, rules, or protocols relating to
wholesale electric markets shall be returned to the affected
wholesale electric market participants to be used to reduce costs or
fees incurred by retail electric customers. The commission shall
adopt rules to prescribe how revenue shall be returned to the
affected wholesale electric market participants under this
subsection.
(f) For purposes of this section and Section 15.026, a
reference to a penalty shall be construed to include disgorgement.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2011, 82nd Leg., R.S., Ch. 996 (H.B. 2133), Sec. 5, eff.
September 1, 2011.

Sec. 15.026. JUDICIAL REVIEW OF ADMINISTRATIVE PENALTY. (a)

Judicial review of a commission order imposing an administrative
penalty or disgorgement is:
(1) instituted by filing a petition as provided by
Subchapter G, Chapter 2001, Government Code; and
(2) under the substantial evidence rule.
(b) If the court sustains the occurrence of the violation, the
court may uphold or reduce the amount of the penalty or disgorgement
and order the person to pay the full or reduced amount of the penalty
or disgorgement. If the court does not sustain the occurrence of the
violation, the court shall order that no penalty or disgorgement is
owed.
(c) When the judgment of the court becomes final, the court
shall proceed under this subsection. If the person paid the amount
of the penalty and that amount is reduced or is not upheld by the
court, the court shall order that the appropriate amount plus accrued
interest be remitted to the person. The rate of the interest is the

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rate charged on loans to depository institutions by the New York

Federal Reserve Bank, and the interest shall be paid for the period
beginning on the date the penalty was paid and ending on the date the
penalty is remitted. If the person gave a supersedeas bond and the
amount of the penalty is not upheld by the court, the court shall
order the release of the bond. If the person gave a supersedeas bond
and the amount of the penalty is reduced, the court shall order the
release of the bond after the person pays the amount.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2011, 82nd Leg., R.S., Ch. 996 (H.B. 2133), Sec. 6, eff.
September 1, 2011.

Sec. 15.027. ADMINISTRATIVE PENALTY COLLECTION; GENERAL

PROVISIONS. (a) An administrative penalty collected under this
subchapter shall be sent to the comptroller.
(b) A proceeding relating to an administrative penalty under
this subchapter is subject to Chapter 2001, Government Code.
(c) The executive director may delegate any power or duty
relating to an administrative penalty given the executive director by
this subchapter to a person designated by the executive director.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 15.028. CIVIL PENALTY AGAINST PUBLIC UTILITY, PAY

TELEPHONE SERVICE PROVIDER, OR AFFILIATE. (a) A public utility,
customer-owned pay telephone service provider under Section 55.178,
or affiliate is subject to a civil penalty if the utility, provider,
or affiliate knowingly violates this title, fails to perform a duty
imposed on it, or fails or refuses to obey an order, rule, direction,
or requirement of the commission or a decree or judgment of a court.
(b) A civil penalty under this section shall be in an amount of
not less than $1,000 and not more than $5,000 for each violation.
(c) A public utility or affiliate commits a separate violation
each day it continues to violate Subsection (a).
(d) The attorney general shall file in the name of the
commission a suit on the attorney general's own initiative or at the
request of the commission to recover the civil penalty under this

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section.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 15.029. CIVIL PENALTY FOR VIOLATING SECTION 12.055 OR

12.154. (a) A member of the commission or an officer or director of
a public utility or affiliate who knowingly violates Section 12.055
or 12.154 is subject to a civil penalty of $1,000 for each violation.
(b) A person other than a person subject to Subsection (a) who
knowingly violates Section 12.154 is subject to a civil penalty of
$500 for each violation.
(c) A member, officer, or employee of the commission who in any
action is found by a preponderance of the evidence to have violated a
provision of Section 12.055 or 12.154 shall be removed from the
person's office or employment.
(d) A civil penalty under this section is recoverable in a suit
filed in the name of the commission by the attorney general on the
attorney general's own initiative or at the request of the
commission.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 15.030. OFFENSE. (a) A person commits an offense if the

person wilfully and knowingly violates this title.
(b) This section does not apply to an offense described by
Section 55.138.
(c) An offense under this section is a felony of the third
degree.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 15.031. PLACE FOR SUIT. A suit for an injunction or a

penalty under this title may be brought in:
(1) Travis County;
(2) a county in which the violation is alleged to have
occurred; or
(3) a county in which a defendant resides.

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Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 15.032. PENALTIES CUMULATIVE. (a) A penalty that accrues

under this title is cumulative of any other penalty.
(b) A suit for the recovery of a penalty does not bar or affect
the recovery of any other penalty or bar a criminal prosecution
against any person.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 15.033. DISPOSITION OF FINES AND PENALTIES. A fine or

penalty collected under this title, other than a fine or penalty
collected in a criminal proceeding or a penalty collected under
Section 15.027(a), shall be paid to the commission.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER C. COMPLAINTS
Sec. 15.051. COMPLAINT BY AFFECTED PERSON. (a) An affected
person may complain to the regulatory authority in writing setting
forth an act or omission by a public utility in violation or claimed
violation of a law that the regulatory authority has jurisdiction to
administer or of an order, ordinance, or rule of the regulatory
authority.
(b) The commission shall keep for a reasonable period
information about each complaint filed with the commission that the
commission has authority to resolve. The information shall include:
(1) the date the complaint is received;
(2) the name of the complainant;
(3) the subject matter of the complaint;
(4) a record of each person contacted in relation to the
complaint;
(5) a summary of the results of the review or investigation
of the complaint; and
(6) if the commission took no action on the complaint, an
explanation of the reason the complaint was closed without action.
(c) The commission shall keep a file about each written
complaint filed with the commission that the commission has authority

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to resolve. The commission shall provide to the person filing the

complaint and to each person or entity complained about information
concerning the commission's policies and procedures on complaint
investigation and resolution. The commission, at least quarterly and
until final disposition of the complaint, shall notify the person
filing the complaint and each person or entity complained about of
the status of the complaint unless the notice would jeopardize an
undercover investigation.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2005, 79th Leg., Ch. 797 (S.B. 408), Sec. 8, eff. September
1, 2005.

Sec. 15.052. COMPLAINT REGARDING RECREATIONAL VEHICLE PARK

OWNER. (a) An affected person may complain to the regulatory
authority in writing setting forth an act or omission by a
recreational vehicle park owner who provides metered electric service
under Subchapter C, Chapter 184, in violation or claimed violation of
a law that the regulatory authority has jurisdiction to administer or
of an order, ordinance, or rule of the regulatory authority.
(b) The commission shall keep for a reasonable period an
information file about each complaint filed with the commission
relating to a recreational vehicle park owner.
(c) The commission, at least quarterly and until final
disposition of the written complaint, shall notify the parties to the
complaint of the status of the complaint unless the notice would
jeopardize an undercover investigation.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER D. CEASE AND DESIST ORDERS

Sec. 15.101. APPLICATION OF SUBCHAPTER. This subchapter
applies only to a person to whom Subtitle B applies.

Added by Acts 2013, 83rd Leg., R.S., Ch. 170 (H.B. 1600), Sec. 1.06,
eff. September 1, 2013.

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Sec. 15.102. RULES. The commission shall adopt rules to

implement this subchapter.

Added by Acts 2013, 83rd Leg., R.S., Ch. 170 (H.B. 1600), Sec. 1.06,
eff. September 1, 2013.

Sec. 15.103. PROCEEDINGS UNDER OTHER LAW. The commission may

proceed solely under this subchapter or under this subchapter in
conjunction with other applicable law.

Added by Acts 2013, 83rd Leg., R.S., Ch. 170 (H.B. 1600), Sec. 1.06,
eff. September 1, 2013.

Sec. 15.104. AUTHORITY TO ISSUE ORDER. (a) The commission on

its own motion may issue a cease and desist order:
(1) after providing notice and an opportunity for a hearing
if practicable or without notice or opportunity for a hearing; and
(2) if the commission determines that the conduct of a
person:
(A) poses a threat to continuous and adequate electric
service;
(B) is hazardous;
(C) creates an immediate danger to the public safety;
or
(D) is causing or can be reasonably expected to cause
an immediate injury to a customer of electric services and that the
injury is incapable of being repaired or rectified by monetary
compensation.
(b) The commission by order or rule may delegate to the
executive director the authority to issue cease and desist orders
under this subchapter.

Added by Acts 2013, 83rd Leg., R.S., Ch. 170 (H.B. 1600), Sec. 1.06,
eff. September 1, 2013.

Sec. 15.105. NOTICE. (a) Notice of a proposed order must be

given not later than the 10th day before the date set for a hearing
if the commission requires notice and hearing before issuing the

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order.
(b) On issuance of an order under Section 15.104 with or
without a hearing, the commission shall serve on the person affected
by the order an order that:
(1) contains a statement of the charges; and
(2) requires the person immediately to cease and desist
from the acts, methods, or practices stated in the order.
(c) The commission shall serve the order by registered or
certified mail, return receipt requested, to the person's last known
address.

Added by Acts 2013, 83rd Leg., R.S., Ch. 170 (H.B. 1600), Sec. 1.06,
eff. September 1, 2013.

Sec. 15.106. HEARING. (a) Chapter 2001, Government Code, does

not apply to the issuance of a cease and desist order under this
subchapter without a hearing. A hearing conducted before or after
issuance of an order under this subchapter is a contested case under
Chapter 2001, Government Code.
(b) If the commission issues an order under this subchapter
without a hearing, the person affected by the order may request a
hearing to affirm, modify, or set aside the order. A request must be
submitted not later than the 30th day after the date the person
receives the order. The commission shall set the hearing for a date
that is:
(1) not later than the 10th day after the date the
commission receives a request for a hearing; or
(2) agreed to by the person and the commission.
(c) At or following the hearing, the commission shall wholly or
partly affirm, modify, or set aside the order. If the person
affected by an order does not request a hearing in the manner
provided by Subsection (b) and the commission does not hold a hearing
on the order, the order is affirmed without further action by the
commission.
(d) The commission may hold a hearing under this subchapter or
may authorize the State Office of Administrative Hearings to hold the
hearing.

Added by Acts 2013, 83rd Leg., R.S., Ch. 170 (H.B. 1600), Sec. 1.06,
eff. September 1, 2013.

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Sec. 15.107. EFFECT OF ORDER PENDING HEARING. Pending a

hearing under this subchapter, an order continues in effect unless
the order is stayed by the commission.

Added by Acts 2013, 83rd Leg., R.S., Ch. 170 (H.B. 1600), Sec. 1.06,
eff. September 1, 2013.

CHAPTER 16. COMMISSION FINANCING

SUBCHAPTER A. ASSESSMENT ON PUBLIC UTILITIES
Sec. 16.001. ASSESSMENT ON PUBLIC UTILITIES. (a) To defray
the expenses incurred in the administration of this title, an
assessment is imposed on each public utility, retail electric
provider, and electric cooperative within the jurisdiction of the
commission that serves the ultimate consumer, including each
interexchange telecommunications carrier.
(b) An assessment under this section is equal to one-sixth of
one percent of the public utility's, retail electric provider's, or
electric cooperative's gross receipts from rates charged to the
ultimate consumer in this state.
(c) An interexchange telecommunications carrier that does not
provide local exchange telephone service may collect the fee imposed
under this section as an additional item separately stated on the
customer bill as "utility gross receipts assessment."

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 405, Sec. 10, eff. Sept. 1, 1999.

Sec. 16.002. PAYMENT DATES. (a) The assessment is due August

15.
(b) A public utility may instead make quarterly payments due
August 15, November 15, February 15, and May 15.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 16.003. LATE PAYMENT PENALTY. (a) An additional fee

equal to 10 percent of the amount due shall be assessed for any late

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payment of an assessment required under this subchapter.

(b) An assessment delinquent for more than 30 days accrues
interest at an annual rate of 12 percent on the amount of the
assessment and penalty due.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 16.004. COLLECTION BY COMPTROLLER. The comptroller shall

collect the assessment and any penalty or interest due under this
subchapter.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER B. GRANTS AND OTHER FINANCIAL ASSISTANCE

Sec. 16.021. GRANTS OF FEDERAL FUNDS. (a) The commission may
apply to an appropriate agency or officer of the United States to
receive and spend federal funds available by grant or other similar
form of financial assistance.
(b) This section does not impair the ability of the commission
to contract with or receive assistance from a state, local, or other
authorized source of funds.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER C. MONEY DISPOSITION, ACCOUNTING, AND BUDGET

Sec. 16.041. APPLICATION OF STATE FUNDS REFORM ACT. Money paid
to the commission or to the office under this title is subject to
Subchapter F, Chapter 404, Government Code.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 16.042. ACCOUNTING RECORDS. The commission shall keep the

accounting records required by the comptroller.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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Sec. 16.043. AUDIT. The financial transactions of the

commission are subject to audit by the state auditor under Chapter
321, Government Code.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 16.044. APPROVAL OF BUDGET. The commission budget is

subject to legislative approval as part of the General Appropriations
Act.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

CHAPTER 17. CUSTOMER PROTECTION

SUBCHAPTER A. GENERAL PROVISIONS
Sec. 17.001. CUSTOMER PROTECTION POLICY. (a) The legislature
finds that new developments in telecommunications services and the
production and delivery of electricity, as well as changes in market
structure, marketing techniques, and technology, make it essential
that customers have safeguards against fraudulent, unfair,
misleading, deceptive, or anticompetitive business practices and
against businesses that do not have the technical and financial
resources to provide adequate service.
(b) The purpose of this chapter is to establish retail customer
protection standards and confer on the commission authority to adopt
and enforce rules to protect retail customers from fraudulent,
unfair, misleading, deceptive, or anticompetitive practices.
(c) Nothing in this section shall be construed to abridge
customer rights set forth in commission rules in effect at the time
of the enactment of this chapter.
(d) This chapter does not limit the constitutional, statutory,
and common law authority of the office of the attorney general.
(e) Nothing in this chapter authorizes a customer to receive
retail electric service from a person other than a certificated
retail electric utility.

Added by Acts 1999, 76th Leg., ch. 1579, Sec. 3, eff. Aug. 30, 1999.

Sec. 17.002. DEFINITIONS. In this chapter:

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(1) "Billing agent" means any entity that submits charges

to the billing utility on behalf of itself or any provider of a
product or service.
(2) "Billing utility" means any telecommunications
provider, as defined by Section 51.002, retail electric provider, or
electric utility that issues a bill directly to a customer for any
telecommunications or electric product or service.
(3) "Certificated telecommunications utility" means a
telecommunications utility that has been granted either a certificate
of convenience and necessity, a certificate of operating authority,
or a service provider certificate of operating authority.
(3-a) "Critical care residential customer" means a
residential customer who has a person permanently residing in the
customer's home who has been diagnosed by a physician as being
dependent upon an electric-powered medical device to sustain life.
(3-b) "Critical load industrial customer" means an
industrial customer for whom an interruption or suspension of
electric service will create a dangerous or life-threatening
condition on the customer's premises.
(4) "Customer" means any person in whose name telephone or
retail electric service is billed, including individuals,
governmental units at all levels of government, corporate entities,
and any other entity with legal capacity to be billed for telephone
or retail electric service.
(5) "Electric utility" has the meaning assigned by Section
31.002.
(6) "Retail electric provider" means a person that sells
electric energy to retail customers in this state after the
legislature authorizes a customer to receive retail electric service
from a person other than a certificated retail electric utility.
(7) "Service provider" means any entity that offers a
product or service to a customer and that directly or indirectly
charges to or collects from a customer's bill an amount for the
product or service on a customer's bill received from a billing
utility.
(8) "Telecommunications utility" has the meaning assigned
by Section 51.002.

Added by Acts 1999, 76th Leg., ch. 1579, Sec. 3, eff. Aug. 30, 1999.
Amended by:

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Acts 2021, 87th Leg., R.S., Ch. 426 (S.B. 3), Sec. 8, eff. June
8, 2021.

Sec. 17.003. CUSTOMER AWARENESS. (a) The commission shall

promote public awareness of changes in the electric and
telecommunications markets, provide customers with information
necessary to make informed choices about available options, and
ensure that customers have an adequate understanding of their rights.
(b) The commission shall compile a report on customer service
at least once each year showing the comparative customer information
from reports given to the commission it deems necessary.
(c) The commission shall adopt and enforce rules to require a
certificated telecommunications utility, a retail electric provider,
or an electric utility to give clear, uniform, and understandable
information to customers about rates, terms, services, customer
rights, and other necessary information as determined by the
commission. The rules must include a list of defined terms common to
the telecommunications and electricity industries and require that
applicable terms be labeled uniformly on each retail bill sent to a
customer by a certificated telecommunications utility, retail
electric provider, or electric utility to facilitate consumer
understanding of relevant billing elements.
(d) Customer awareness efforts by the commission shall be
conducted in English and Spanish and any other language as necessary.
(d-1) An electric utility providing electric delivery service
for a retail electric provider, as defined by Section 31.002, shall
provide to the retail electric provider, and the retail electric
provider shall periodically provide to the retail electric provider's
retail customers together with bills sent to the customers,
information about:
(1) the electric utility's procedures for implementing
involuntary load shedding initiated by the independent organization
certified under Section 39.151 for the ERCOT power region;
(2) the types of customers who may be considered critical
care residential customers, critical load industrial customers, or
critical load according to commission rules adopted under Section
38.076;
(3) the procedure for a customer to apply to be considered
a critical care residential customer, a critical load industrial

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customer, or critical load according to commission rules adopted

under Section 38.076; and
(4) reducing electricity use at times when involuntary load
shedding events may be implemented.

Added by Acts 1999, 76th Leg., ch. 1579, Sec. 3, eff. Aug. 30, 1999.
Amended by:
Acts 2009, 81st Leg., R.S., Ch. 648 (H.B. 1822), Sec. 1, eff.
September 1, 2009.
Acts 2021, 87th Leg., R.S., Ch. 426 (S.B. 3), Sec. 9, eff. June
8, 2021.

Sec. 17.004. CUSTOMER PROTECTION STANDARDS. (a) All buyers of

telecommunications and retail electric services are entitled to:
(1) protection from fraudulent, unfair, misleading,
deceptive, or anticompetitive practices, including protection from
being billed for services that were not authorized or provided;
(2) choice of a telecommunications service provider, a
retail electric provider, or an electric utility, where that choice
is permitted by law, and to have that choice honored;
(3) information in English and Spanish and any other
language as the commission deems necessary concerning rates, key
terms and conditions, and the basis for any claim of environmental
benefits of certain production facilities;
(4) protection from discrimination on the basis of race,
color, sex, nationality, religion, marital status, income level, or
source of income and from unreasonable discrimination on the basis of
geographic location;
(5) impartial and prompt resolution of disputes with a
certificated telecommunications utility, a retail electric provider,
or an electric utility and disputes with a telecommunications service
provider related to unauthorized charges and switching of service;
(6) privacy of customer consumption and credit information;
(7) accuracy of metering and billing;
(8) bills presented in a clear, readable format and easy-
to-understand language that uses defined terms as required by
commission rules adopted under Section 17.003;
(9) information in English and Spanish and any other
language as the commission deems necessary concerning low-income

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assistance programs and deferred payment plans;

(10) all consumer protections and disclosures established
by the Fair Credit Reporting Act (15 U.S.C. Section 1681 et seq.) and
the Truth in Lending Act (15 U.S.C. Section 1601 et seq.); and
(11) after retail competition begins as authorized by the
legislature, programs provided by retail electric providers that
offer eligible low-income customers energy efficiency programs, an
affordable rate package, and bill payment assistance programs
designed to reduce uncollectible accounts.
(b) The commission may adopt and enforce rules as necessary or
appropriate to carry out this section, including rules for minimum
service standards for a certificated telecommunications utility, a
retail electric provider, or an electric utility relating to customer
deposits and the extension of credit, switching fees, levelized
billing programs, and termination of service and to energy efficiency
programs, an affordable rate package, and bill payment assistance
programs for low-income customers. The commission may waive language
requirements for good cause.
(c) The commission shall request the comments of the office of
the attorney general in developing the rules that may be necessary or
appropriate to carry out this section.
(d) The commission shall coordinate its enforcement efforts
regarding the prosecution of fraudulent, misleading, deceptive, and
anticompetitive business practices with the office of the attorney
general in order to ensure consistent treatment of specific alleged
violations.
(e) Nothing in this section shall be construed to abridge
customer rights set forth in commission rules or to abridge the
rights of low-income customers to receive benefits through pending or
operating programs in effect at the time of the enactment of this
chapter.
(f) The commission shall adopt rules to provide automatic
enrollment of eligible utility customers for lifeline telephone
service and reduced electric rates available to low-income
households. Each state agency, on the request of the commission,
shall assist in the adoption and implementation of those rules.
(g) Notwithstanding any other provision of this title, the
rules adopted under Subsection (b) shall provide full, concurrent
reimbursement for the costs of any programs provided under Subsection
(a)(11) and for reimbursement for the difference between any

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affordable rate package provided under Subsection (a)(11) and any

rates otherwise applicable.

Added by Acts 1999, 76th Leg., ch. 1579, Sec. 3, eff. Aug. 30, 1999.
Amended by:
Acts 2009, 81st Leg., R.S., Ch. 648 (H.B. 1822), Sec. 2, eff.
September 1, 2009.

Sec. 17.005. PROTECTIONS FOR CUSTOMERS OF MUNICIPALLY OWNED

UTILITIES. (a) A municipally owned utility may not be deemed to be
a "service provider" or "billing agent" for purposes of Sections
17.156(b) and (e).
(b) The governing body of a municipally owned utility shall
adopt, implement, and enforce rules that shall have the effect of
accomplishing the objectives set out in Sections 17.004(a) and (b)
and 17.102, as to the municipally owned utility within its
certificated service area.
(c) The governing body of a municipally owned utility or its
designee shall perform the dispute resolution function provided for
by Section 17.157 for disputes arising from services provided by the
municipally owned utility to electric customers served within the
municipally owned utility's certificated service area.
(d) With respect to electric customers served by a municipally
owned utility outside its certificated service area or otherwise
served through others' distribution facilities, after retail
competition begins as authorized by the legislature, the provisions
of this chapter as administered by the commission apply.
(e) Nothing in this chapter shall be deemed to apply to a
wholesale customer of a municipally owned utility.
(f) A municipally owned utility shall periodically provide with
bills sent to retail customers of the utility information about:
(1) the utility's procedure for implementing involuntary
load shedding;
(2) the types of customers who may be considered critical
care residential customers, critical load industrial customers, or
critical load according to commission rules adopted under Section
38.076;
(3) the procedure for a customer to apply to be considered
a critical care residential customer, a critical load industrial

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customer, or critical load according to commission rules adopted

under Section 38.076; and
(4) reducing electricity use at times when involuntary load
shedding events may be implemented.

Added by Acts 1999, 76th Leg., ch. 1579, Sec. 3, eff. Aug. 30, 1999.
Amended by:
Acts 2021, 87th Leg., R.S., Ch. 426 (S.B. 3), Sec. 10, eff. June
8, 2021.

Sec. 17.006. PROTECTIONS FOR CUSTOMERS OF ELECTRIC

COOPERATIVES. (a) An electric cooperative shall not be deemed to be
a "service provider" or "billing agent" for purposes of Sections
17.156(b) and (e).
(b) The electric cooperative shall adopt, implement, and
enforce rules that shall have the effect of accomplishing the
objectives set out in Sections 17.004(a) and (b) and 17.102.
(c) The board of directors of the electric cooperative or its
designee shall perform the dispute resolution function provided for
by Section 17.157 for electric customers served by the electric
cooperative within its certificated service area.
(d) With respect to electric customers served by an electric
cooperative outside its certificated service area or otherwise served
through others' distribution facilities, after the legislature
authorizes retail competition, the provisions of this chapter as
administered by the commission shall apply.
(e) Nothing in this chapter shall be deemed to apply to a
wholesale customer of an electric cooperative.
(f) An electric cooperative shall periodically provide with
bills sent to retail customers of the cooperative information about:
(1) the cooperative's procedure for implementing
involuntary load shedding;
(2) the types of customers who may be considered critical
care residential customers, critical load industrial customers, or
critical load according to commission rules adopted under Section
38.076;
(3) the procedure for a customer to apply to be considered
a critical care residential customer, a critical load industrial
customer, or critical load according to commission rules adopted

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under Section 38.076; and

(4) reducing electricity use at times when involuntary load
shedding events may be implemented.

Added by Acts 1999, 76th Leg., ch. 1579, Sec. 3, eff. Aug. 30, 1999.
Amended by:
Acts 2021, 87th Leg., R.S., Ch. 426 (S.B. 3), Sec. 11, eff. June
8, 2021.

Sec. 17.007. IDENTIFICATION PROCESS FOR CUSTOMER SERVICE

BENEFITS. (a) The Health and Human Services Commission, on request
of the commission, shall assist in developing an automatic process
for identifying low-income customers to retail electric providers and
certificated telecommunications utilities to enable those providers
and utilities to offer customer service, discounts, bill payment
assistance, or other methods of assistance.
(b) The commission and the Health and Human Services Commission
shall continue the memorandum of understanding entered into by those
agencies in effect on January 1, 2017, that establishes the
respective duties of those agencies in relation to the automatic
process, and may amend the memorandum of understanding as necessary
to achieve the goals of this section.
(c) The commission may not require a retail electric provider
or a certificated telecommunications utility to offer customer
service, discounts, bill payment assistance, targeted bill messaging,
or other benefits for which the provider or utility is not
reimbursed.
(d) The commission may not submit a request to the Health and
Human Services Commission to provide for a process to identify low-
income electric customers for a fiscal year unless:
(1) the commission receives a request from one or more
retail electric providers not later than July 31 of the previous
fiscal year for a list of low-income electric customers to be
developed; and
(2) each retail electric provider that submits a request to
the commission under Subdivision (1) agrees to reimburse the
commission for the cost of development of the list on terms agreed to
by the commission and the provider.

Added by Acts 2001, 77th Leg., ch. 1451, Sec. 1, eff. Sept. 1, 2001.

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Amended by:
Acts 2017, 85th Leg., R.S., Ch. 48 (S.B. 1976), Sec. 1, eff.
September 1, 2017.

Sec. 17.008. PROTECTION OF RESIDENTIAL ELECTRIC SERVICE

APPLICANTS AND CUSTOMERS. (a) In this section and in Section
17.009:
(1) "Credit history":
(A) means information regarding an individual's past
history of:
(i) financial responsibility;
(ii) payment habits; or
(iii) creditworthiness; and
(B) does not include an individual's outstanding
balance for retail electric or telecommunications service.
(2) "Credit score" means a score, grade, or value that is
derived by a consumer reporting agency, as defined under Section
603(f) of the Fair Credit Reporting Act (15 U.S.C. Section 1681a(f)),
using data from a credit history in any type of model, method, or
program for the purpose of grading or ranking credit report data,
whether derived electronically, from an algorithm, through a computer
software application model or program, or through any other analogous
process.
(3) "Utility payment data" means a measure that is derived
by a consumer reporting agency, as defined under Section 603(f) of
the Fair Credit Reporting Act (15 U.S.C. Section 1681a(f)), from a
model specifically designed to correlate to utility payment
histories.
(b) A retail electric provider may not deny an applicant's
request to become a residential electric service customer on the
basis of the applicant's credit history or credit score, but may use
the applicant's utility payment data until the later of January 1,
2007, or the date on which the price to beat is no longer in effect
in the geographic area in which the customer is located.
(c) Notwithstanding Subsection (b), while a retail electric
provider is required to provide service to a geographic area as the
affiliated retail electric provider, the provider may not deny an
applicant's request to become a residential electric service customer
within that geographic area on the basis of the applicant's credit

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history, credit score, or utility payment data.

(d) After the date described in Subsection (b), a retail
electric provider, including an affiliated retail electric provider,
may not deny an applicant's request to become a residential electric
service customer on the basis of the applicant's credit history,
credit score, or utility payment data but may use the applicant's
electric bill payment history.
(e) A retail electric provider may not use a credit score, a
credit history, or utility payment data as the basis for determining
the price for month-to-month electric service or electric service
that includes a fixed price commitment of 12 months or less:
(1) for an existing residential customer; or
(2) in response to an applicant's request to become a
residential electric service customer.
(f) After the date described in Subsection (b), on request by a
customer or former customer in this state, a retail electric provider
or electric utility shall timely provide to the customer or former
customer bill payment history information with the retail electric
provider or electric utility during the preceding 12-month period.
Bill payment history information may be obtained by the customer or
former customer once during each 12-month period without charge. If
additional copies of bill payment history information are requested
during a 12-month period, the electric service provider may charge
the customer or former customer a reasonable fee for each copy.
(g) On request by a retail electric provider, another retail
electric provider or electric utility shall timely verify information
that purports to show a customer's service and bill payment history
with the retail electric provider or electric utility.
(h) This section does not limit a retail electric provider's
authority to require a deposit or advance payment as a condition of
service.
(i) Notwithstanding Subsection (e), a retail electric provider
may provide rewards, benefits, or credits to residential electric
service customers on the basis of the customer's payment history for
retail electric service to that provider.

Added by Acts 2005, 79th Leg., Ch. 926 (H.B. 412), Sec. 1, eff.
September 1, 2005.

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Sec. 17.009. PROTECTION OF RESIDENTIAL TELEPHONE SERVICE

APPLICANTS AND CUSTOMERS. (a) A provider of basic local
telecommunications services and nonbasic network services may not
deny an applicant's request to become a residential customer on the
basis of the applicant's credit history or credit score.
(b) A provider of basic local telecommunications services and
nonbasic network services may not use a credit score or credit
history as the basis for determining price for service:
(1) for an existing residential customer; or
(2) in response to an applicant's request to become a
residential customer.
(c) This section does not limit the authority of a provider of
basic local telecommunications services and nonbasic network services
to require a deposit, advance payment, or credit limit as a condition
of service.

Added by Acts 2005, 79th Leg., Ch. 926 (H.B. 412), Sec. 1, eff.
September 1, 2005.

Sec. 17.010. DISASTER BILLING AWARENESS. The commission in

cooperation with the Texas Division of Emergency Management shall:
(1) promote public awareness of bill payment assistance
available during a disaster for electric, water, and wastewater
services, including assistance for consumers on level billing plans;
and
(2) provide the public with information about billing
practices during a disaster to ensure that consumers of electric,
water, and wastewater services have an adequate understanding of
their rights.

Added by Acts 2019, 86th Leg., R.S., Ch. 285 (H.B. 2320), Sec. 2, eff.
September 1, 2019.

SUBCHAPTER B. CERTIFICATION, REGISTRATION, AND REPORTING REQUIREMENTS

Sec. 17.051. ADOPTION OF RULES. (a) The commission shall
adopt rules relating to certification, registration, and reporting
requirements for a certificated telecommunications utility, a retail
electric provider, or an electric utility, as well as all
telecommunications utilities that are not dominant carriers, pay

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telephone providers, qualifying facilities that are selling capacity

into the wholesale or retail market, exempt wholesale generators, and
power marketers.
(b) The rules adopted under Subsections (a) and (c) shall be
consistent with and no less effective than federal law and may not
require the disclosure of highly sensitive competitive or trade
secret information.
(c) The commission shall adopt rules governing the local
registration of retail electric providers under Section 39.358.

Added by Acts 1999, 76th Leg., ch. 1579, Sec. 3, eff. Aug. 30, 1999.
Amended by Acts 2003, 78th Leg., ch. 48, Sec. 1, eff. Sept. 1, 2003.

Sec. 17.052. SCOPE OF RULES. The commission may adopt and

enforce rules to:
(1) require certification or registration with the
commission as a condition of doing business in this state, except
that this requirement does not apply to municipally owned utilities;
(2) amend certificates or registrations to reflect changed
ownership and control;
(3) establish rules for customer service and protection;
(4) suspend or revoke certificates or registrations for
repeated violations of this chapter or commission rules, except that
the commission may not revoke a certificate of convenience and
necessity of an electric utility except as provided by Section 37.059
or a certificate of convenience and necessity of a telecommunications
utility except as provided by Section 54.008; and
(5) order disconnection of a pay telephone service
provider's pay telephones or revocation of certification or
registration for repeated violations of this chapter or commission
rules.

Added by Acts 1999, 76th Leg., ch. 1579, Sec. 3, eff. Aug. 30, 1999.

Sec. 17.053. REPORTS. The commission may require a

telecommunications service provider, a retail electric provider, or
an electric utility to submit reports to the commission concerning
any matter over which it has authority under this chapter.

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Added by Acts 1999, 76th Leg., ch. 1579, Sec. 3, eff. Aug. 30, 1999.

SUBCHAPTER C. CUSTOMER'S RIGHT TO CHOICE

Sec. 17.101. POLICY. It is the policy of this state that all
customers be protected from the unauthorized switching of a
telecommunications service provider, a retail electric provider, or
an electric utility selected by the customer to provide service,
where choice is permitted by law.

Added by Acts 1999, 76th Leg., ch. 1579, Sec. 3, eff. Aug. 30, 1999.

Sec. 17.102. RULES RELATING TO CHOICE. The commission shall

adopt and enforce rules that:
(1) ensure that customers are protected from deceptive
practices employed in obtaining authorizations of service and in the
verification of change orders, including negative option marketing,
sweepstakes, and contests that cause customers to unknowingly change
their telecommunications service provider, retail electric provider,
or electric utility, where choice is permitted by law;
(2) provide for clear, easily understandable
identification, in each bill sent to a customer, of all
telecommunications service providers, retail electric providers, or
electric utilities submitting charges on the bill;
(3) ensure that every service provider submitting charges
on the bill is clearly and easily identified on the bill along with
its services, products, and charges, using defined terms as required
by commission rules adopted under Section 17.003;
(4) provide that unauthorized changes in service be
remedied at no cost to the customer within a period established by
the commission;
(5) require refunds or credits to the customer in the event
of an unauthorized change; and
(6) provide for penalties for violations of commission
rules adopted under this section, including fines and revocation of
certificates or registrations, by this action denying the
certificated telecommunications utility, the retail electric
provider, or the electric utility the right to provide service in
this state, except that the commission may not revoke a certificate

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of convenience and necessity of an electric utility except as

provided by Section 37.059 or a certificate of convenience and
necessity of a telecommunications utility except as provided by
Section 54.008.

Added by Acts 1999, 76th Leg., ch. 1579, Sec. 3, eff. Aug. 30, 1999.
Amended by:
Acts 2009, 81st Leg., R.S., Ch. 648 (H.B. 1822), Sec. 3, eff.
September 1, 2009.

SUBCHAPTER D. PROTECTION AGAINST UNAUTHORIZED CHARGES

Sec. 17.151. REQUIREMENTS FOR SUBMITTING CHARGES. (a) A
service provider, retail electric provider, or billing agent may
submit charges for a new product or service to be billed on a
customer's telephone or retail electric bill on or after the
effective date of this section only if:
(1) the service provider offering the product or service
has thoroughly informed the customer of the product or service being
offered, including all associated charges, and has explicitly
informed the customer that the associated charges for the product or
service will appear on the customer's telephone or electric bill;
(2) the customer has clearly and explicitly consented to
obtain the product or service offered and to have the associated
charges appear on the customer's telephone or electric bill and the
consent has been verified as provided by Subsection (b);
(3) the service provider offering the product or service
and any billing agent for the service provider:
(A) has provided the customer with a toll-free
telephone number the customer may call and an address to which the
customer may write to resolve any billing dispute and to answer
questions; and
(B) has contracted with the billing utility to bill for
products and services on the billing utility's bill as provided by
Subsection (c); and
(4) the service provider, retail electric provider, or
billing agent uses defined terms on the bill as required by
commission rules adopted under Section 17.003.
(b) The customer consent required by Subsection (a)(2) must be
verified by the service provider offering the product or service by

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authorization from the customer. A record of the customer consent,

including verification, must be maintained by the service provider
offering the product or service for a period of at least 24 months
immediately after the consent and verification have been obtained.
The method of obtaining customer consent and verification must
include one or more of the following:
(1) written authorization from the customer;
(2) toll-free electronic authorization placed from the
telephone number that is the subject of the product or service;
(3) oral authorization obtained by an independent third
party; or
(4) any other method of authorization approved by the
commission or the Federal Communications Commission.
(c) The contract required by Subsection (a)(3)(B) must include
the service provider's name, business address, and business telephone
number and shall be maintained by the billing utility for as long as
the billing for the products and services continues and for the 24
months immediately following the permanent discontinuation of the
billing.
(d) A service provider offering a product or service to be
charged on a customer's telephone or electric bill and any billing
agent for the service provider may not use any fraudulent, unfair,
misleading, deceptive, or anticompetitive marketing practice to
obtain customers, including the use of negative option marketing,
sweepstakes, and contests.
(e) Unless verification is required by federal law or rules
implementing federal law, Subsection (b) does not apply to customer-
initiated transactions with a certificated telecommunications
provider or an electric utility for which the service provider has
the appropriate documentation.
(f) If a service provider is notified by a billing utility that
a customer has reported to the billing utility that a charge made by
the service provider is unauthorized, the service provider shall
cease to charge the customer for the unauthorized product or service.
(g) This section does not apply to message telecommunications
services charges that are initiated by dialing 1+, 0+, 0-, 1010XXX,
or collect calls and charges for video services if the service
provider has the necessary call detail record to establish the
billing for the call or service.

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Added by Acts 1999, 76th Leg., ch. 1579, Sec. 3, eff. Aug. 30, 1999.
Amended by:
Acts 2009, 81st Leg., R.S., Ch. 648 (H.B. 1822), Sec. 4, eff.
September 1, 2009.

Sec. 17.152. RESPONSIBILITIES OF BILLING UTILITY. (a) If a

customer's telephone or retail electric bill is charged for any
product or service without proper customer consent or verification,
the billing utility, on its knowledge or notification of any
unauthorized charge, shall promptly, not later than 45 days after the
date of knowledge or notification of the charge:
(1) notify the service provider to cease charging the
customer for the unauthorized product or service;
(2) remove any unauthorized charge from the customer's
bill;
(3) refund or credit to the customer all money that has
been paid by the customer for any unauthorized charge, and if the
unauthorized charge is not adjusted within three billing cycles,
shall pay interest on the amount of the unauthorized charge;
(4) on the customer's request, provide the customer with
all billing records under its control related to any unauthorized
charge within 15 business days after the date of the removal of the
unauthorized charge from the customer's bill; and
(5) maintain for at least 24 months a record of every
customer who has experienced any unauthorized charge for a product or
service on the customer's telephone or electric bill and who has
notified the billing utility of the unauthorized charge.
(b) A record required by Subsection (a)(5) shall contain for
each unauthorized charge:
(1) the name of the service provider that offered the
product or service;
(2) any affected telephone numbers or addresses;
(3) the date the customer requested that the billing
utility remove the unauthorized charge;
(4) the date the unauthorized charge was removed from the
customer's telephone or electric bill; and
(5) the date any money that the customer paid for the
unauthorized charges was refunded or credited to the customer.
(c) A billing utility may not:

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(1) disconnect or terminate telecommunications or electric

service to any customer for nonpayment of an unauthorized charge; or
(2) file an unfavorable credit report against a customer
who has not paid charges the customer has alleged were unauthorized
unless the dispute regarding the unauthorized charge is ultimately
resolved against the customer, except that the customer shall remain
obligated to pay any charges that are not in dispute, and this
subsection does not apply to those undisputed charges.

Added by Acts 1999, 76th Leg., ch. 1579, Sec. 3, eff. Aug. 30, 1999.

Sec. 17.153. RECORDS OF DISPUTED CHARGES. (a) Every service

provider shall maintain a record of every disputed charge for a
product or service placed on a customer's bill.
(b) The record required under Subsection (a) shall contain for
every disputed charge:
(1) any affected telephone numbers or addresses;
(2) the date the customer requested that the billing
utility remove the unauthorized charge;
(3) the date the unauthorized charge was removed from the
customer's telephone or retail electric bill; and
(4) the date action was taken to refund or credit to the
customer any money that the customer paid for the unauthorized
charges.
(c) The record required by Subsection (a) shall be maintained
for at least 24 months following the completion of all steps required
by Section 17.152(a).

Added by Acts 1999, 76th Leg., ch. 1579, Sec. 3, eff. Aug. 30, 1999.

Sec. 17.154. NOTICE. (a) A billing utility shall provide

notice of a customer's rights under this section in the manner
prescribed by the commission.
(b) Notice of a customer's rights must be provided by mail to
each residential and retail business customer within 60 days of the
effective date of this section or by inclusion in the publication of
the telephone directory next following the effective date of this
section. In addition, each billing utility shall send the notice to
new customers at the time service is initiated or to any customer at

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that customer's request.

Added by Acts 1999, 76th Leg., ch. 1579, Sec. 3, eff. Aug. 30, 1999.

Sec. 17.155. PROVIDING COPY OF RECORDS. A billing utility

shall provide a copy of records maintained under Sections 17.151(c),
17.152, and 17.154 to the commission staff on request. A service
provider shall provide a copy of records maintained under Sections
17.151(b) and 17.153 to the commission on request.

Added by Acts 1999, 76th Leg., ch. 1579, Sec. 3, eff. Aug. 30, 1999.

Sec. 17.156. VIOLATIONS. (a) If the commission finds that a

billing utility violated this subchapter, the commission may
implement penalties and other enforcement actions under Chapter 15.
(b) If the commission finds that any other service provider or
billing agent subject to this subchapter has violated this subchapter
or has knowingly provided false information to the commission on
matters subject to this subchapter, the commission may enforce the
provisions of Chapter 15 against the service provider or billing
agent as if it were regulated by the commission.
(c) Neither the authority granted under this section nor any
other provision of this subchapter shall be construed to grant the
commission jurisdiction to regulate service providers or billing
agents who are not otherwise subject to commission regulation, other
than as specifically provided by this chapter.
(d) If the commission finds that a billing utility or service
provider repeatedly violates this subchapter, the commission may, if
the action is consistent with the public interest, suspend, restrict,
or revoke the registration or certificate of the telecommunications
service provider, retail electric provider, or electric utility, by
this action denying the telecommunications service provider, retail
electric provider, or electric utility the right to provide service
in this state, except that the commission may not revoke a
certificate of convenience and necessity of an electric utility
except as provided by Section 37.059 or a certificate of convenience
and necessity of a telecommunications utility except as provided by
Section 54.008.
(e) If the commission finds that a service provider or billing

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agent has repeatedly violated any provision of this subchapter, the

commission may order the billing utility to terminate billing and
collection services for that service provider or billing agent.
(f) Nothing in this subchapter shall be construed to preclude a
billing utility from taking action on its own to terminate or
restrict its billing and collection services.

Added by Acts 1999, 76th Leg., ch. 1579, Sec. 3, eff. Aug. 30, 1999.

Sec. 17.157. DISPUTES. (a) The commission may resolve

disputes between a retail customer and a billing utility, service
provider, telecommunications utility, retail electric provider, or
electric utility.
(b) In exercising its authority under Subsection (a), the
commission may:
(1) order a billing utility, service provider, retail
electric provider, or electric utility to produce information or
records;
(2) require that all contracts, bills, and other
communications from a billing utility, service provider, retail
electric provider, or electric utility display a working toll-free
telephone number that customers may call with complaints and
inquiries;
(3) require a billing utility, service provider, retail
electric provider, or electric utility to refund or credit
overcharges or unauthorized charges with interest if the billing
utility, service provider, retail electric provider, or electric
utility has failed to comply with commission rules or a contract with
the customer;
(4) order appropriate relief to ensure that a customer's
choice of a telecommunications service provider, a retail electric
provider, or an electric utility that encompasses a geographic area
in which more than one provider has been certificated is honored;
(5) require the continuation of service to a residential or
small commercial customer while a dispute is pending regarding
charges the customer has alleged were unauthorized; and
(6) investigate an alleged violation.
(c) The commission shall adopt procedures for the resolution of
disputes in a timely manner, which in no event shall exceed 60 days.

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Added by Acts 1999, 76th Leg., ch. 1579, Sec. 3, eff. Aug. 30, 1999.

Sec. 17.158. CONSISTENCY WITH FEDERAL LAW. Rules adopted by

the commission under this subchapter shall be consistent with and not
more burdensome than applicable federal laws and rules.

Added by Acts 1999, 76th Leg., ch. 1579, Sec. 3, eff. Aug. 30, 1999.

SUBCHAPTER E. PROTECTION AGAINST UTILITY SERVICE DISCONNECTION

Sec. 17.201. DEFINITION. In this subchapter, "nonsubmetered
master metered multifamily property" means an apartment, a leased or
owner-occupied condominium, or one or more buildings containing at
least 10 dwellings that receive electric utility service that is
master metered but not submetered.

Added by Acts 2013, 83rd Leg., R.S., Ch. 322 (H.B. 1772), Sec. 2, eff.
January 1, 2014.

Sec. 17.202. NOTICE OF DISCONNECTION TO MUNICIPALITIES FOR

NONSUBMETERED MASTER METERED MULTIFAMILY PROPERTIES. (a) A retail
electric provider or a vertically integrated electric utility, not
including a municipally owned utility or an electric cooperative, in
an area where customer choice has not been introduced shall send a
written notice of service disconnection to a municipality before the
retail electric provider or vertically integrated electric utility
disconnects service to a nonsubmetered master metered multifamily
property for nonpayment if:
(1) the property is located in the municipality; and
(2) the municipality establishes an authorized
representative to receive the notice as described by Section
17.203(c).
(b) The retail electric provider or vertically integrated
electric utility in an area where customer choice has not been
introduced shall send the notice required by this section not later
than the 10th day before the date electric service is scheduled for
disconnection.

Added by Acts 2013, 83rd Leg., R.S., Ch. 322 (H.B. 1772), Sec. 2, eff.

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January 1, 2014.

Sec. 17.203. ADDITIONAL SAFEGUARDS. (a) The customer

safeguards provided by this subchapter are in addition to safeguards
provided by other law or agency rules.
(b) This subchapter does not prohibit a municipality or the
commission from adopting customer safeguards that exceed the
safeguards provided by this chapter.
(c) The commission by rule shall develop a mechanism by which a
municipality may provide the commission with the contact information
of the municipality's authorized representative to whom the notice
required by Section 17.202 must be sent. The commission shall make
the contact information available to the public.

Added by Acts 2013, 83rd Leg., R.S., Ch. 322 (H.B. 1772), Sec. 2, eff.
January 1, 2014.

SUBTITLE B. ELECTRIC UTILITIES

CHAPTER 31. GENERAL PROVISIONS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 31.001. LEGISLATIVE FINDINGS; PURPOSE OF SUBTITLE. (a)
This subtitle is enacted to protect the public interest inherent in
the rates and services of electric utilities. The purpose of this
subtitle is to establish a comprehensive and adequate regulatory
system for electric utilities to assure rates, operations, and
services that are just and reasonable to the consumers and to the
electric utilities.
(b) Electric utilities are by definition monopolies in many of
the services provided and areas they serve. As a result, the normal
forces of competition that regulate prices in a free enterprise
society do not always operate. Public agencies regulate electric
utility rates, operations, and services, except as otherwise provided
by this subtitle.
(c) The wholesale electric industry, through federal
legislative, judicial, and administrative actions, is becoming a more
competitive industry that does not lend itself to traditional
electric utility regulatory rules, policies, and principles. As a
result, the public interest requires that rules, policies, and

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principles be formulated and applied to protect the public interest

in a more competitive marketplace. The development of a competitive
wholesale electric market that allows for increased participation by
electric utilities and certain nonutilities is in the public
interest.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 31.002. DEFINITIONS. In this subtitle:

(1) "Affiliated power generation company" means a power
generation company that is affiliated with or the successor in
interest of an electric utility certificated to serve an area.
(2) "Affiliated retail electric provider" means a retail
electric provider that is affiliated with or the successor in
interest of an electric utility certificated to serve an area.
(3) "Aggregation" includes the following:
(A) the purchase of electricity from a retail electric
provider, a municipally owned utility, or an electric cooperative by
an electricity customer for its own use in multiple locations,
provided that an electricity customer may not avoid any nonbypassable
charges or fees as a result of aggregating its load; or
(B) the purchase of electricity by an electricity
customer as part of a voluntary association of electricity customers,
provided that an electricity customer may not avoid any nonbypassable
charges or fees as a result of aggregating its load.
(4) "Customer choice" means the freedom of a retail
customer to purchase electric services, either individually or
through voluntary aggregation with other retail customers, from the
provider or providers of the customer's choice and to choose among
various fuel types, energy efficiency programs, and renewable power
suppliers.
(4-a) "Distributed natural gas generation facility" means a
facility installed on the customer's side of the meter that uses
natural gas to generate not more than 2,000 kilowatts of electricity.
(4-b) "Electric generation equipment lessor or operator"
means a person who rents to or operates for compensation on behalf of
a third party electric generation equipment that:
(A) is used on a site of the third party until the
third party is able to obtain sufficient electricity service;

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(B) produces electricity on site to be consumed by the

third party and not resold; and
(C) does not interconnect with the electric
transmission or distribution system.
(5) "Electric Reliability Council of Texas" or "ERCOT"
means the area in Texas served by electric utilities, municipally
owned utilities, and electric cooperatives that is not synchronously
interconnected with electric utilities outside the state.
(6) "Electric utility" means a person or river authority
that owns or operates for compensation in this state equipment or
facilities to produce, generate, transmit, distribute, sell, or
furnish electricity in this state. The term includes a lessee,
trustee, or receiver of an electric utility and a recreational
vehicle park owner who does not comply with Subchapter C, Chapter
184, with regard to the metered sale of electricity at the
recreational vehicle park. The term does not include:
(A) a municipal corporation;
(B) a qualifying facility;
(C) a power generation company;
(D) an exempt wholesale generator;
(E) a power marketer;
(F) a corporation described by Section 32.053 to the
extent the corporation sells electricity exclusively at wholesale and
not to the ultimate consumer;
(G) an electric cooperative;
(H) a retail electric provider;
(I) this state or an agency of this state; or
(J) a person not otherwise an electric utility who:
(i) furnishes an electric service or commodity only
to itself, its employees, or its tenants as an incident of employment
or tenancy, if that service or commodity is not resold to or used by
others;
(ii) owns or operates in this state equipment or
facilities to produce, generate, transmit, distribute, sell, or
furnish electric energy to an electric utility, if the equipment or
facilities are used primarily to produce and generate electric energy
for consumption by that person;
(iii) owns or operates in this state a recreational
vehicle park that provides metered electric service in accordance
with Subchapter C, Chapter 184;

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(iv) owns or operates equipment used solely to

provide electricity charging service for consumption by an
alternatively fueled vehicle, as defined by Section 502.004,
Transportation Code; or
(v) is an electric generation equipment lessor or
operator.
(7) "Exempt wholesale generator" means a person who is
engaged directly or indirectly through one or more affiliates
exclusively in the business of owning or operating all or part of a
facility for generating electric energy and selling electric energy
at wholesale and who:
(A) does not own a facility for the transmission of
electricity, other than an essential interconnecting transmission
facility necessary to effect a sale of electric energy at wholesale;
and
(B) has:
(i) applied to the Federal Energy Regulatory
Commission for a determination under 15 U.S.C. Section 79z-5a; or
(ii) registered as an exempt wholesale generator as
required by Section 35.032.
(8) "Freeze period" means the period beginning on January
1, 1999, and ending on December 31, 2001.
(9) "Independent system operator" means an entity
supervising the collective transmission facilities of a power region
that is charged with nondiscriminatory coordination of market
transactions, systemwide transmission planning, and network
reliability.
(10) "Power generation company" means a person, including a
person who owns or operates a distributed natural gas generation
facility, that:
(A) generates electricity that is intended to be sold
at wholesale, including the owner or operator of electric energy
storage equipment or facilities to which Subchapter E, Chapter 35,
applies;
(B) does not own a transmission or distribution
facility in this state other than an essential interconnecting
facility, a facility not dedicated to public use, or a facility
otherwise excluded from the definition of "electric utility" under
this section; and
(C) does not have a certificated service area, although

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its affiliated electric utility or transmission and distribution

utility may have a certificated service area.
(11) "Power marketer" means a person who:
(A) becomes an owner of electric energy in this state
for the purpose of selling the electric energy at wholesale;
(B) does not own generation, transmission, or
distribution facilities in this state;
(C) does not have a certificated service area; and
(D) has:
(i) been granted authority by the Federal Energy
Regulatory Commission to sell electric energy at market-based rates;
or
(ii) registered as a power marketer under Section
35.032.
(12) "Power region" means a contiguous geographical area
which is a distinct region of the North American Electric Reliability
Council.
(13) "Qualifying cogenerator" and "qualifying small power
producer" have the meanings assigned those terms by 16 U.S.C.
Sections 796(18)(C) and 796(17)(D). A qualifying cogenerator that
provides electricity to a purchaser of the cogenerator's thermal
output is not for that reason considered to be a retail electric
provider or a power generation company.
(14) "Qualifying facility" means a qualifying cogenerator
or qualifying small power producer.
(15) "Rate" includes a compensation, tariff, charge, fare,
toll, rental, or classification that is directly or indirectly
demanded, observed, charged, or collected by an electric utility for
a service, product, or commodity described in the definition of
electric utility in this section and a rule, practice, or contract
affecting the compensation, tariff, charge, fare, toll, rental, or
classification that must be approved by a regulatory authority.
(16) "Retail customer" means the separately metered end-use
customer who purchases and ultimately consumes electricity.
(17) "Retail electric provider" means a person that sells
electric energy to retail customers in this state. A retail electric
provider may not own or operate generation assets but may aggregate
distributed energy resources under Section 39.3515. The term does
not include a person not otherwise a retail electric provider who
owns or operates equipment used solely to provide electricity

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charging service for consumption by an alternatively fueled vehicle,

as defined by Section 502.004, Transportation Code.
(18) "Separately metered" means metered by an individual
meter that is used to measure electric energy consumption by a retail
customer and for which the customer is directly billed by a utility,
retail electric provider, electric cooperative, or municipally owned
utility.
(19) "Transmission and distribution utility" means a person
or river authority that owns or operates for compensation in this
state equipment or facilities to transmit or distribute electricity,
except for facilities necessary to interconnect a generation facility
with the transmission or distribution network, a facility not
dedicated to public use, or a facility otherwise excluded from the
definition of "electric utility" under this section, in a qualifying
power region certified under Section 39.152, but does not include a
municipally owned utility or an electric cooperative.
(20) "Transmission service" includes construction or
enlargement of facilities, transmission over distribution facilities,
control area services, scheduling resources, regulation services,
reactive power support, voltage control, provision of operating
reserves, and any other associated electrical service the commission
determines appropriate, except that, on and after the implementation
of customer choice, control area services, scheduling resources,
regulation services, provision of operating reserves, and reactive
power support, voltage control, and other services provided by
generation resources are not "transmission service."

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 405, Sec. 11, eff. Sept. 1, 1999.
Amended by:
Acts 2011, 82nd Leg., R.S., Ch. 890 (S.B. 365), Sec. 1, eff.
September 1, 2011.
Acts 2011, 82nd Leg., R.S., Ch. 1069 (S.B. 943), Sec. 1, eff.
September 1, 2011.
Acts 2013, 83rd Leg., R.S., Ch. 979 (H.B. 2049), Sec. 1, eff.
September 1, 2013.
Acts 2021, 87th Leg., R.S., Ch. 255 (H.B. 1572), Sec. 1, eff.
September 1, 2021.
Acts 2021, 87th Leg., R.S., Ch. 389 (S.B. 1202), Sec. 1, eff.
September 1, 2021.

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Acts 2023, 88th Leg., R.S., Ch. 768 (H.B. 4595), Sec. 22.001,
eff. September 1, 2023.
Acts 2023, 88th Leg., R.S., Ch. 945 (S.B. 1699), Sec. 1, eff.
September 1, 2023.

Sec. 31.0021. CHARGING SERVICE. The commission by rule may

exempt from the definition of "electric utility" or "retail electric
provider" under Section 31.002 a provider who owns or operates
equipment used solely to provide electricity charging service for a
mode of transportation.

Added by Acts 2021, 87th Leg., R.S., Ch. 389 (S.B. 1202), Sec. 2, eff.
September 1, 2021.

Sec. 31.004. ENERGY-EFFICIENT SCHOOL FACILITIES. (a) The

commission may serve as a resource center to assist school districts
in developing energy-efficient facilities.
(b) As a resource center under this section, the commission
may:
(1) present programs to school districts relating to
managing energy, training school-plant operators, and designing
energy-efficient buildings;
(2) provide school districts with technical assistance in
managing energy;
(3) collect and distribute information relating to energy
management in school facilities; and
(4) offer energy resource workshops to educators and make
available to educators a film library on energy-related matters and
energy education lesson packages.
(c) The commission shall provide information to school
districts regarding how a school district may finance the
installation of solar electric generation panels for school district
buildings.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2007, 80th Leg., R.S., Ch. 939 (H.B. 3693), Sec. 18, eff.
September 1, 2007.

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Sec. 31.005. CUSTOMER-OPTION PROGRAMS. (a) This section

applies to:
(1) a municipally owned electric utility;
(2) an electric cooperative;
(3) an electric utility;
(4) a power marketer;
(5) a retail electric provider; and
(6) a transmission and distribution utility.
(b) An entity to which this section applies shall consider
establishing customer-option programs that encourage the reduction of
air contaminant emissions, such as:
(1) an appliance retirement and recycling program;
(2) a solar water heating market transformation program;
(3) an air conditioning tune-up program;
(4) a program that allows the use of on-site energy storage
as an eligible efficiency measure in existing programs;
(5) a program that encourages the deployment of advanced
electricity meters;
(6) a program that encourages the installation of cool
roofing materials;
(7) a program that establishes lighting limits;
(8) a distributed energy generation technology program; and
(9) a program that encourages the use of high-efficiency
building distribution transformers and variable air volume fan
controls.

Added by Acts 2005, 79th Leg., Ch. 1095 (H.B. 2129), Sec. 6, eff.
September 1, 2005.

SUBCHAPTER B. CYBERSECURITY
Sec. 31.051. DEFINITION. In this subchapter, "utility" means:
(1) an electric cooperative;
(2) an electric utility;
(3) a municipally owned electric utility; or
(4) a transmission and distribution utility.

Added by Acts 2019, 86th Leg., R.S., Ch. 509 (S.B. 64), Sec. 22, eff.
September 1, 2019.

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Sec. 31.052. CYBERSECURITY COORDINATION PROGRAM FOR UTILITIES.

(a) The commission shall establish a program to monitor
cybersecurity efforts among utilities in this state. The program
shall:
(1) provide guidance on best practices in cybersecurity and
facilitate the sharing of cybersecurity information between
utilities; and
(2) provide guidance on best practices for cybersecurity
controls for supply chain risk management of cybersecurity systems
used by utilities, which may include, as applicable, best practices
related to:
(A) software integrity and authenticity;
(B) vendor risk management and procurement controls,
including notification by vendors of incidents related to the
vendor's products and services; and
(C) vendor remote access.
(b) The commission may collaborate with the state cybersecurity
coordinator and the cybersecurity council established under Chapter
2054, Government Code, in implementing the program.

Added by Acts 2019, 86th Leg., R.S., Ch. 509 (S.B. 64), Sec. 22, eff.
September 1, 2019.

CHAPTER 32. JURISDICTION AND POWERS OF COMMISSION AND OTHER

REGULATORY AUTHORITIES
SUBCHAPTER A. COMMISSION JURISDICTION
Sec. 32.001. COMMISSION JURISDICTION. (a) Except as provided
by Section 32.002, the commission has exclusive original jurisdiction
over the rates, operations, and services of an electric utility in:
(1) areas outside a municipality; and
(2) areas inside a municipality that surrenders its
jurisdiction to the commission under Section 33.002.
(b) The commission has exclusive appellate jurisdiction to
review an order or ordinance of a municipality exercising exclusive
original jurisdiction under this subtitle.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 32.0015. REGULATION OF SUCCESSOR ELECTRIC UTILITY OR

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ELECTRIC COOPERATIVE. If an electric utility purchases, acquires,

merges, or consolidates with or acquires 50 percent or more of the
stock of an electric utility or electric cooperative, the commission
shall regulate the successor electric utility or electric cooperative
in the same manner that the commission would regulate the entity that
was subject to the stricter regulation before the purchase,
acquisition, merger, or consolidation.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 12, eff. Sept. 1, 1999.

Sec. 32.002. LIMITATION ON COMMISSION JURISDICTION. Except as

otherwise provided by this title, this subtitle does not authorize
the commission to:
(1) regulate or supervise a rate or service of a
municipally owned utility; or
(2) affect the jurisdiction, power, or duty of a
municipality exercising exclusive original jurisdiction in that
municipality's regulation and supervision of an electric utility in
the municipality.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 32.003. EXEMPT AREA JURISDICTION. Notwithstanding an

election under Subchapter A, Chapter 33, by a municipality on the
issue of surrendering its jurisdiction, the commission may:
(1) consider an electric utility's revenues and return on
investment in an area exempt from commission regulation in
establishing rates and charges in an area that is not exempt from
commission regulation; and
(2) exercise necessary powers to give effect to an order
under this title for the benefit of an area that is not exempt from
commission regulation.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 32.004. ASSISTANCE TO MUNICIPALITY. On request of a

municipality, the commission may advise and assist the municipality
with respect to a question or proceeding arising under this title.

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Assistance provided by the commission may include aid to a

municipality on a matter pending before the commission, a court, or
the municipality's governing body, such as making a staff member
available as a witness or otherwise providing evidence to the
municipality.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER B. EXEMPTIONS FROM COMMISSION JURISDICTION

Sec. 32.051. EXEMPTION OF RIVER AUTHORITY FROM WHOLESALE RATE
REGULATION. Notwithstanding any other provision of this title, the
commission may not directly or indirectly regulate revenue
requirements, rates, fuel costs, fuel charges, or fuel acquisitions
that are related to the generation and sale of electricity at
wholesale, and not to ultimate consumers, by a river authority
operating a steam generating plant on or before January 1, 1999.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 405, Sec. 13, eff. Sept. 1, 1999.

Sec. 32.052. ABILITY OF CERTAIN RIVER AUTHORITIES TO CONSTRUCT

IMPROVEMENTS. A river authority operating a steam generating plant
on or before January 1, 1999, may acquire, finance, construct,
rebuild, repower, and use new or existing power plants, equipment,
transmission lines, or other assets to sell electricity exclusively
at wholesale to:
(1) a purchaser in San Saba, Llano, Burnet, Travis,
Bastrop, Blanco, Colorado, or Fayette County; or
(2) a purchaser in an area served by the river authority on
January 1, 1975.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 405, Sec. 13, eff. Sept. 1, 1999.

Sec. 32.053. ABILITY OF CERTAIN RIVER AUTHORITY AFFILIATES TO

CONSTRUCT IMPROVEMENTS. (a) This section applies only to a
corporation that:
(1) sells electricity exclusively at wholesale, and not to

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ultimate consumers;
(2) is authorized by Chapter 152, Water Code; and
(3) acts on behalf of a river authority.
(b) Notwithstanding a river authority's enabling legislation or
Chapter 152, Water Code, a corporation may:
(1) acquire, finance, construct, rebuild, repower, operate,
or sell a facility directly related to the generation of electricity;
(2) sell, at wholesale only, the output of the facility to
a purchaser, other than an ultimate consumer, at any location in this
state; and
(3) purchase and sell electricity, at wholesale only, to a
purchaser, other than an ultimate consumer, at any location in this
state.
(c) This subchapter does not prevent a corporation from
purchasing transmission and related services from a river authority.
(d) Except as provided by this section, the development,
financing, ownership, and operation of a facility by a corporation is
subject to all other applicable laws.
(e) The property, gross receipts, and income of a corporation
acting on behalf of a river authority under this section are subject
to, and the corporation shall pay, taxes and assessments of the
federal government, this state, a political subdivision of this
state, or a taxing district of this state on the same basis as an
exempt wholesale generator.
(f) The proceeds from the sale of bonds or other obligations
the interest on which is exempt from taxation and that are issued by
a corporation or river authority subject to this section, other than
a bond or obligation available to an investor-owned utility or exempt
wholesale generator, may not be used by the corporation to finance
the construction or acquisition of or the rebuilding or repowering of
a facility for the generation of electricity by the corporation.
(g) Notwithstanding any other law, the board of directors of a
river authority may sell, lease, loan, or otherwise transfer some,
all, or substantially all of the electric generation property of the
river authority to a nonprofit corporation authorized under this
section or Chapter 152, Water Code. The property transfer shall be
made under terms and conditions approved by the board of directors of
the river authority.
(h) Subsections (a)-(f) do not apply to a corporation created
under Chapter 152, Water Code, to serve an area described in Section

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32.052.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 405, Sec. 14, eff. Sept. 1, 1999; Acts
2001, 77th Leg., ch. 1420, Sec. 8.400, eff. Sept. 1, 2001.

Sec. 32.054. RESTRICTIONS ON AUTHORITY OF CORPORATIONS OR RIVER

AUTHORITY. (a) This subchapter does not authorize a river authority
to acquire, install, construct, make additions to, or operate steam
generating plants having an aggregate capacity greater than 5,000
megawatts to serve a purchaser in the area served by the river
authority on January 1, 1975.
(b) A river authority or a corporation acting on behalf of a
river authority under this subchapter may provide retail service only
to a retail customer served by the river authority or corporation on
September 1, 1995.
(c) Except as provided by this subchapter, this subchapter does
not limit a power granted a river authority in its enabling
legislation or other applicable law.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER C. REQUIRED REPORTS AND FILINGS

Sec. 32.101. TARIFF FILINGS. (a) An electric utility shall
file with each regulatory authority a tariff showing each rate that
is:
(1) subject to the regulatory authority's original or
appellate jurisdiction; and
(2) in effect for a utility service, product, or commodity
offered by the utility.
(b) The electric utility shall file as a part of the tariff
required under Subsection (a) each rule that relates to or affects:
(1) a rate of the utility; or
(2) a utility service, product, or commodity furnished by
the electric utility.
(c) The commission shall consider customer names and addresses,
prices, individual customer contracts, and expected load and usage
data as highly sensitive trade secrets. That information is not
subject to disclosure under Chapter 552, Government Code.

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Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 32.102. DEPRECIATION ACCOUNT. The commission shall

require each electric or municipally owned utility to carry a proper
and adequate depreciation account in accordance with:
(1) the rates and methods prescribed by the commission
under Section 36.056; and
(2) any other rule the commission adopts.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 32.103. ACCOUNTS OF PROFITS AND LOSSES. An electric or

municipally owned utility shall keep separate accounts showing
profits or losses from the sale or lease of merchandise, including an
appliance, a fixture, or equipment.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 32.104. REPORT OF CERTAIN EXPENSES. A regulatory

authority may require an electric utility to annually report the
utility's expenditures for:
(1) business gifts and entertainment; and
(2) advertising or public relations, including expenditures
for institutional and consumption-inducing purposes.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

CHAPTER 33. JURISDICTION AND POWERS OF MUNICIPALITY

SUBCHAPTER A. GENERAL PROVISIONS
Sec. 33.001. MUNICIPAL JURISDICTION. (a) To provide fair,
just, and reasonable rates and adequate and efficient services, the
governing body of a municipality has exclusive original jurisdiction
over the rates, operations, and services of an electric utility in
areas in the municipality, subject to the limitations imposed by this
title.
(b) Repealed by Acts 2021, 87th Leg., R.S., Ch. 727 (H.B. 3853
), Sec. 2, eff. June 15, 2021.

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Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 1, eff.
September 7, 2005.
Acts 2021, 87th Leg., R.S., Ch. 727 (H.B. 3853), Sec. 2, eff.
June 15, 2021.

Sec. 33.002. SURRENDER OF MUNICIPAL JURISDICTION TO COMMISSION.

(a) A municipality shall regulate all local utility service in the
municipality until the commission assumes jurisdiction over a local
utility under this subtitle.
(b) A municipality may elect to have the commission exercise
exclusive original jurisdiction over electric utility rates,
operations, and services in the municipality by ordinance or by
submitting the question of the surrender of its jurisdiction to the
voters at a municipal election.
(c) The governing body of a municipality shall submit at a
municipal election the question of surrendering its jurisdiction to
the commission if the governing body receives a petition signed by a
number of qualified voters of the municipality equal to at least the
lesser of 20,000 or 10 percent of the number of voters voting in the
last preceding general election in the municipality.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 33.003. REINSTATEMENT OF MUNICIPAL JURISDICTION. (a) A

municipality that surrenders its jurisdiction to the commission may
at any time reinstate its jurisdiction by a vote of the electorate.
(b) A municipality that reinstates its jurisdiction under
Subsection (a) may not surrender that jurisdiction before the fifth
anniversary of the date of the election in which the municipality
elected to reinstate its jurisdiction.
(c) A municipality may not, by a vote of the electorate,
reinstate the jurisdiction of the governing body during the time a
case involving the municipality is pending before the commission.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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Sec. 33.004. AREA EXEMPT FROM COMMISSION REGULATION. (a) If a

municipality does not surrender its jurisdiction, local utility
service in the municipality is exempt from regulation by the
commission under this subtitle to the extent that this subtitle
applies to local service.
(b) The municipality may exercise in the exempt area the same
regulatory powers under the same standards and rules as the
commission or under other consistent standards and rules.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 33.005. EXEMPT AREA REPORTING. (a) An electric utility

serving an area exempt from commission regulation is subject to the
reporting requirements of this title.
(b) A report must be filed with:
(1) the governing body of the municipality; and
(2) the commission.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 33.006. COMMISSION POWERS IN NONEXEMPT AREAS. This

subchapter does not limit the duty and power of the commission to
regulate the service and rates of a municipally regulated electric
utility for service provided to another area in this state.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 33.007. ALLOWABLE CHARGES. A municipality that performs a

regulatory function under this title may make each charge that is
authorized by:
(1) this title; or
(2) the applicable franchise agreement.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 33.008. FRANCHISE CHARGES. (a) Following the end of the

freeze period for a municipality that has been served by an electric

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utility, and following the date a municipally owned utility or an

electric cooperative has implemented customer choice for a
municipality that has been served by that municipally owned utility
or electric cooperative, a municipality may impose on an electric
utility, transmission and distribution utility, municipally owned
utility, or electric cooperative, as appropriate, that provides
distribution service within the municipality a reasonable charge as
specified in Subsection (b) for the use of a municipal street, alley,
or public way to deliver electricity to a retail customer. A
municipality may not impose a charge on:
(1) an electric utility, or transmission and distribution
utility, municipally owned utility, or electric cooperative for
electric service provided outside the municipality;
(2) a qualifying facility;
(3) an exempt wholesale generator;
(4) a power marketer;
(5) a retail electric provider;
(6) a power generation company;
(7) a person that generates electricity on and after
January 1, 2002; or
(8) an aggregator, as that term is defined by Section
39.353.
(b) If a municipality collected a charge or fee for a franchise
to use a municipal street, alley, or public way from an electric
utility, a municipally owned utility, or an electric cooperative
before the end of the freeze period, the municipality, after the end
of the freeze period or after implementation of customer choice by
the municipally owned utility or electric cooperative, as
appropriate, is entitled to collect from each electric utility,
transmission and distribution utility, municipally owned utility, or
electric cooperative that uses the municipality's streets, alleys, or
public ways to provide distribution service a charge based on each
kilowatt hour of electricity delivered by the utility to each retail
customer whose consuming facility's point of delivery is located
within the municipality's boundaries. The charge imposed shall be
equal to the total electric franchise fee revenue due the
municipality from electric utilities, municipally owned utilities, or
electric cooperatives, as appropriate, for calendar year 1998 divided
by the total kilowatt hours delivered during 1998 by the applicable
electric utility, municipally owned utility, or electric cooperative

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to retail customers whose consuming facilities' points of delivery

were located within the municipality's boundaries. The compensation
a municipality may collect from each electric utility, transmission
and distribution utility, municipally owned utility, or electric
cooperative providing distribution service shall be equal to the
charge per kilowatt hour determined for 1998 multiplied times the
number of kilowatt hours delivered within the municipality's
boundaries.
(c) The municipal franchise charges authorized by this section
shall be considered a reasonable and necessary operating expense of
each electric utility, transmission and distribution utility,
municipally owned utility, or electric cooperative that is subject to
a charge under this section. The charge shall be included in the
nonbypassable delivery charges that a customer's retail electric
provider must pay under Section 39.107 to the utility serving the
customer.
(d) The municipal franchise charges authorized by this section
are in lieu of any franchise charges or fees payable under a
franchise agreement in effect before the expiration of the freeze
period or, as appropriate, before the implementation of customer
choice by a municipally owned utility or electric cooperative.
Except as otherwise provided by this section, this section does not
affect a provision of a franchise agreement in effect before the end
of the freeze period or, as appropriate, before the implementation of
customer choice by a municipally owned utility or electric
cooperative.
(e) A municipality may conduct an audit or other inquiry or may
pursue any cause of action in relation to an electric utility's,
transmission and distribution utility's, municipally owned utility's,
or electric cooperative's payment of charges authorized by this
section only if such audit, inquiry, or pursuit of a cause of action
concerns a payment made less than two years before commencement of
such audit, inquiry, or pursuit of a cause of action; provided,
however, that this subsection does not apply to an audit, inquiry, or
cause of action commenced before September 1, 1999. An electric
utility, transmission and distribution utility, municipally owned
utility, or electric cooperative shall, on request of the
municipality in connection with a municipal audit, identify the
service provider and the type of service delivered for any service in
addition to electricity delivered directly to retail customers

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through the utility's electricity-conducting facilities that are

located in the municipality's streets, alleys, or public ways and for
which the utility receives compensation.
(f) Notwithstanding any other provision of this section, on the
expiration of a franchise agreement existing on September 1, 1999, an
electric utility, transmission and distribution utility, municipally
owned utility, or electric cooperative and a municipality may
mutually agree to a different level of compensation or to a different
method for determining the amount the municipality may charge for the
use of a municipal street, alley, or public way in connection with
the delivery of electricity at retail within the municipality.
(g) After the end of the freeze period or after implementation
of customer choice by the municipally owned utility or electric
cooperative, as appropriate, a newly incorporated municipality or a
municipality that has not previously collected compensation for the
delivery of electricity at retail within the municipality may adopt
and collect compensation based on the same rate per kilowatt hour
that is collected by any other municipality in the same county that
is served by the same electric utility, transmission and distribution
utility, municipally owned utility, or electric cooperative.
(h) In this section, "distribution service" means the delivery
of electricity to all retail customers.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 15, eff. Sept. 1, 1999.

SUBCHAPTER B. RATE DETERMINATION

Sec. 33.021. RATE DETERMINATION. (a) A municipality
regulating an electric utility under this subtitle shall require the
utility to submit information as necessary to make a reasonable
determination of rate base, expenses, investment, and rate of return
in the municipality.
(b) A municipality shall make a determination under Subsection
(a) using the procedures and requirements prescribed by this title.
(c) A municipality shall retain personnel necessary to make the
determination of reasonable rates.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 33.0211. RATES AND FEES CHARGED BY CERTAIN MUNICIPALLY

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OWNED UTILITIES. (a) This section applies only to a municipally

owned utility that is located in a municipality that is considered to
be a defunding municipality under Chapter 109, Local Government Code.
(b) The governing body of a municipally owned utility may not
charge a customer:
(1) at a rate higher than the rate the customer was charged
or would have been charged on January 1 of the year that the
municipality was determined to be a defunding municipality;
(2) any customer fees in amounts higher than the customer
fees the customer was charged or would have been charged on January 1
of the year that the municipality was determined to be a defunding
municipality; or
(3) any types of customer fees that the customer was not
charged or would not have been charged on January 1 of the year that
the municipality was determined to be a defunding municipality.
(c) If a municipally owned utility has not transferred funds to
the defunding municipality described by Subsection (a) in the
immediately preceding 12 months, the municipally owned utility may
increase its rates to account for:
(1) pass-through charges imposed by a state regulatory body
or the independent organization certified under Section 39.151;
(2) fuel, hedging, or wholesale power cost increases; or
(3) fulfillment of debt obligations or compliance with
Chapter 1502, Government Code.
(d) A municipally owned utility that increases rates under
Subsection (c) may not transfer funds to the defunding municipality
described by Subsection (a) until the date the criminal justice
division of the governor's office issues a written determination in
accordance with Section 109.005, Local Government Code, finding that
the municipality described by Subsection (a) has reversed the
reduction described by Section 109.003(1), Local Government Code.

Added by Acts 2021, 87th Leg., R.S., Ch. 199 (H.B. 1900), Sec. 5.01,
eff. September 1, 2021.
Amended by:
Acts 2023, 88th Leg., R.S., Ch. 768 (H.B. 4595), Sec. 22.002,
eff. September 1, 2023.

Sec. 33.022. CONSIDERATION OF REVENUES AND RETURN FROM

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NONEXEMPT AREA. In establishing rates and charges in an area exempt

from commission regulation, the governing body may consider an
electric utility's revenues and return on investment in an area that
is not exempt from commission regulation.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 33.023. RATEMAKING PROCEEDINGS. (a) The governing body

of a municipality participating in or conducting a ratemaking
proceeding may engage rate consultants, accountants, auditors,
attorneys, and engineers to:
(1) conduct investigations, present evidence, and advise
and represent the governing body; and
(2) assist the governing body with litigation in an
electric utility ratemaking proceeding before the governing body, a
regulatory authority, or a court.
(b) The electric utility in the ratemaking proceeding shall
reimburse the governing body of the municipality for the reasonable
cost of the services of a person engaged under Subsection (a) to the
extent the applicable regulatory authority determines is reasonable.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 33.024. STATEMENT OF INTENT. (a) Not later than the 31st
day before the date an electric utility files a statement of intent
under Section 36.102, the electric utility shall provide notice of
intent to file the statement to each municipality having original
jurisdiction.
(b) Not later than the 30th day after the date a municipality
receives notice under Subsection (a), the municipality may request
that the electric utility file with the municipality a statement of
intent in accordance with Section 36.102.
(c) If requested by a municipality under Subsection (b), the
electric utility shall file the statement of intent with the
municipality at the same time the statement is filed with the
commission.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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Sec. 33.025. MUNICIPAL STANDING. (a) A municipality has

standing in each case before the commission that relates to an
electric utility providing service in the municipality.
(b) A municipality's standing is subject to the right of the
commission to:
(1) determine standing in a case involving a retail service
area dispute that involves two or more electric utilities; and
(2) consolidate municipalities on an issue of common
interest.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 33.026. JUDICIAL REVIEW. A municipality is entitled to

judicial review of a commission order relating to an electric utility
providing services in the municipality as provided by Section 15.001.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER C. APPEAL OF MUNICIPAL ORDER

Sec. 33.051. APPEAL BY PARTY. A party to a rate proceeding
before a municipality's governing body may appeal the governing
body's decision to the commission.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 33.052. APPEAL BY RESIDENTS. The residents of a

municipality may appeal to the commission the decision of the
municipality's governing body in a rate proceeding by filing with the
commission a petition for review signed by a number of qualified
voters of the municipality equal to at least the lesser of 20,000 or
10 percent of the qualified voters of the municipality.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 33.053. FILING OF APPEAL. (a) An appeal under this

subchapter is initiated by filing a petition for review with the
commission and serving a copy of the petition on each party to the

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original rate proceeding.

(b) The appeal must be initiated not later than the 30th day
after the date of the final decision by the governing body of the
municipality.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 33.054. HEARING AND ORDER. (a) An appeal under this

subchapter, Subchapter D, or Subchapter E is de novo and based on
the test year presented to the municipality.
(b) The commission shall enter a final order establishing the
rates the commission determines the municipality should have set in
the ordinance to which the appeal applies.
(c) In a proceeding involving the rates of a municipally owned
utility, the commission must enter a final order on or before the
185th day after the date the appeal is perfected or the utility files
a rate application as prescribed by Section 33.104.
(d) In a proceeding in which a rate change is concurrently
sought from the commission under the commission's original
jurisdiction, the commission must enter a final order on or before
the later of the 120th day after the date the appeal is perfected or
the date final action must be taken in the proceeding filed with the
commission.
(e) In a proceeding not governed by Subsection (c) or (d), the
commission must enter a final order on or before the 185th day after
the date the appeal is perfected.
(f) If the commission fails to enter a final order before the
expiration of the applicable period prescribed by Subsections (c)-
(e), the rates proposed by the utility are considered to be approved
by the commission and take effect on the expiration of that period.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 33.055. APPLICABILITY OF RATES. (a) Temporary or

permanent rates set by the commission are prospective and observed
from the date of the applicable commission order, except an interim
rate order necessary to effect uniform system-wide rates or to
provide an electric utility the opportunity to avoid confiscation
during the period beginning on the date a petition for review is

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filed with the commission and ending on the date of a final order
establishing rates.
(b) The commission shall order interim rates on a prima facie
showing by the electric utility that it has experienced confiscation
during that period. The electric utility shall refund or credit
against future bills:
(1) money collected under the interim rates in excess of
the rate finally ordered; and
(2) interest on that money, at the current rate as
determined by the commission.
(c) In this section, "confiscation" includes negative cash flow
experienced by an electric utility at any time a rate case proceeding
is pending.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER D. PROVISIONS APPLICABLE TO APPEAL BY RATEPAYERS OUTSIDE

MUNICIPALITY
Sec. 33.101. APPEAL BY RATEPAYERS OUTSIDE MUNICIPALITY. (a)
The ratepayers of a municipally owned utility who are outside the
municipality may appeal to the commission an action of the governing
body of the municipality affecting the municipally owned utility's
rates by filing with the commission a petition for review signed by a
number of ratepayers served by the utility outside the municipality
equal to at least the lesser of 10,000 or five percent of those
ratepayers.
(b) A petition for review is properly signed if signed by a
person or the spouse of a person in whose name residential utility
service is carried.
(c) For purposes of this section, each person who receives a
separate bill is a ratepayer. A person who receives more than one
bill may not be counted as more than one ratepayer.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 33.102. IDENTIFICATION OF RATEPAYERS OUTSIDE MUNICIPALITY.

(a) A municipality that owns a utility shall:
(1) disclose to any person, on request, the number of
ratepayers who reside outside the municipality; and

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(2) provide to any person, on request, a list of the names

and addresses of the ratepayers who reside outside the municipality.
(b) The municipality may not charge a fee for disclosing the
information under Subsection (a)(1). The municipality may charge a
reasonable fee for providing information under Subsection (a)(2).
(c) The municipality shall provide information requested under
Subsection (a)(1) by telephone or in writing, as preferred by the
person making the request.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 33.103. FILING OF APPEAL. (a) Not later than the 14th
day after the date a governing body of a municipality makes a final
decision, the municipality shall issue a written report stating the
effect of the decision on each class of ratepayer.
(b) An appeal under this subchapter is initiated by filing a
petition for review with the commission and serving a copy of the
petition on each party to the original rate proceeding.
(c) The appeal must be initiated not later than the 45th day
after the date the municipality issues the written report required by
Subsection (a).

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 33.104. RATE APPLICATION. Not later than the 90th day
after the date a petition for review is filed that complies with
Section 33.103, the municipality shall file with the commission a
rate application that complies in all material respects with the
rules and forms prescribed by the commission. The commission may,
for good cause shown, extend the period for filing a rate
application.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER E. RATE DETERMINATION AND APPEAL OF ORDERS OF CERTAIN

MUNICIPAL UTILITIES
Sec. 33.121. APPLICATION OF COMMISSION REVIEW. A municipally
owned utility is subject to this subchapter if the utility is a

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utility:
(1) whose rates are appealed under Subchapter D;
(2) for which the commission orders a decrease in annual
nonfuel base revenues that exceeds the greater of $25,000,000 or 10
percent of the utility's nonfuel base revenues, as computed on a
total system basis without regard to the utility's municipal
boundaries and established in the appealed rate ordinance; and
(3) for which the commission finds that the rates paid by
the combined residential or other major customer class, other than a
class in which the municipality is the customer of the municipally
owned utility, are removed from cost-of-service levels to the extent
that, under the nonfuel base revenue requirement adopted by the
commission as computed on a total system basis without regard to the
municipality's boundaries, a change in nonfuel base rate revenues in
excess of 50 percent from adjusted test year levels would be required
to move that class to a relative rate of return of unity (1.00 or 100
percent) under the cost-of-service methodology adopted by the
commission in an appeal under Subchapter D.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 33.122. REVIEW OF CERTAIN RATE DECISIONS. (a) Except as

provided by Subsections (b)-(f), for a period of 10 years beginning
on the later of August 28, 1989, or the effective date of the rate
ordinance that is the subject of the commission's final order
invoking the application of this section, the commission has
appellate jurisdiction over the rates charged by the municipally
owned utility, both inside and outside the municipality, in the same
manner and subject to the same commission powers and authority
provided by this subtitle for an electric utility.
(b) The commission has jurisdiction to review the cost
allocation and rate design methodologies adopted by the governing
body of a municipally owned utility subject to this section. If the
commission finds that the cost-of-service methodologies result in
rates that are unjust, unreasonable, or unreasonably discriminatory,
or unduly preferential to a customer class, the commission may order
the implementation of ratesetting methodologies the commission finds
reasonable.
(c) The commission shall ensure that a customer class, other

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than a class in which the municipality is the customer of the

municipally owned utility, does not pay rates that result in a
relative rate of return of more than 115 percent under the cost-of-
service methodology found reasonable by the commission. A customer
class may not experience a percentage base rate increase that is
greater than 1-1/2 times the system average base increase. In moving
an above-cost class toward cost-of-service levels, each class
farthest above cost shall be moved sequentially toward cost so that
no above-cost class moves toward cost until no other class is further
removed from cost.
(d) A municipality subject to this section may design
residential rates, as a matter of intra-class rate design, to
accomplish reasonable energy conservation goals, notwithstanding any
other provision of this title.
(e) The commission's jurisdiction under this section may be
invoked by any party to a local rate proceeding required by this
section in the same manner as an appeal of the rates of an electric
utility under Section 33.051.
(f) The commission's jurisdiction under this section does not
extend to a municipally owned utility's:
(1) revenue requirements, whether base rate or fuel
revenues;
(2) invested capital;
(3) return on invested capital;
(4) debt service coverage ratio; or
(5) level of transfer of revenues from the utility to the
municipality's general fund.
(g) The governing body of a municipally owned utility subject
to this section shall establish procedures similar to the procedures
of a municipality that retains original jurisdiction under Section
33.001 to regulate an electric utility operating in the municipality.
The procedures must include a public hearing process in which an
affected ratepayer is granted party status on request and is grouped
for purposes of participation in accordance with common or divergent
interests, including the particular interests of all-electric
residential ratepayers and residential ratepayers outside the
municipality.
(h) This section does not require the governing body of a
municipality or the governing board of a municipally owned utility
subject to this section to adopt procedures that require the use of

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the Texas Rules of Evidence, the Texas Rules of Civil Procedure, or

the presentation of sworn testimony or any other form of sworn
evidence.
(i) The governing body of a municipally owned utility subject
to this section shall appoint a consumer advocate to represent the
interests of residential and small commercial ratepayers in the
municipality's local rate proceedings. The consumer advocate's
reasonable costs of participating in a proceeding, including the
reasonable costs of ratemaking consultants and expert witnesses,
shall be funded by and recovered from residential and small
commercial ratepayers.
(j) The commission shall adopt rules applicable to a party to
an appeal under Subchapter D that provide for the public disclosure
of financial and in-kind contributions and expenditures related to
preparing and filing an appeal petition and preparing expert
testimony or legal representation for an appeal. A party or customer
who is a member of a party who makes a financial contribution or in-
kind contribution to assist in an appeal by another party or customer
class under Subchapter D shall be required, on a finding of the
commission to that effect, to pay the municipally owned utility a
penalty equivalent in amount to two times the amount of the
contribution.
(k) This section does not limit the right of a party or
customer to spend money to represent its own interests following the
filing of a petition with the commission under Subchapter D.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 33.123. REVIEW OF CERTAIN DECISIONS FOR RATES CHARGED

OUTSIDE MUNICIPALITY. (a) For a period of 10 years beginning on the
later of August 28, 1989, or the effective date of the rate ordinance
that is the subject of the commission's final order invoking the
application of this section, the commission has appellate
jurisdiction over the rates charged by the municipally owned utility,
outside the municipality, as provided by this section.
(b) Except as otherwise provided by this section, a ratepayer
of a municipally owned utility subject to this section who resides
outside the municipality may appeal any action of the governing body
of a municipality affecting the rates charged by the municipally

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owned utility outside the municipality by filing a petition for

review with the commission in the manner provided for an appeal under
Subchapter D. The petition must plainly disclose that the cost of
the appeal will be funded by a surcharge on the monthly electric
bills of ratepayers outside the municipality as prescribed by the
commission.
(c) After the commission approves the sufficiency of a
petition, the appellants shall submit to the office for approval a
budget itemizing the scope and expected cost of consultant services
to be purchased by the appellants in the appeal.
(d) Not later than the 120th day after the date the commission
enters its final order, the municipality shall assess a onetime
surcharge on a per capita basis among residential ratepayers who
reside outside the municipality to pay the reasonable consultant and
legal costs approved by the counsellor. The municipality shall
reimburse the appellants for incurred costs not later than the 90th
day after the date the commission enters its final order.
(e) A municipality may not:
(1) include the costs associated with its defense of an
appeal under this section in the rates charged a ratepayer outside
the municipality; or
(2) if the municipality appeals an order entered by the
commission under this section, include the costs associated with its
appeal in the rates charged a ratepayer outside the municipality.
(f) A ratepayer who brings an appeal under this section may not
receive funding for rate case expenses except from a residential
ratepayer who resides outside the municipality or from another
municipality inside whose boundaries the municipally owned utility
provides service. The commission shall adopt rules for reporting
financial and in-kind contributions in support of an appeal under
this section. If the commission finds that an appellant has received
contributions from a source other than from a ratepayer who resides
outside the municipality or from another municipality, the appeal and
each commission order entered in the appeal are void.
(g) The commission has jurisdiction in an appeal under this
section to review and ensure that the revenue requirements of a
municipally owned utility subject to this section are reasonable.
The jurisdiction under this subsection does not extend to regulating
the use and level of a transfer of the utility's revenues to the
municipality's general fund.

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(h) The commission has jurisdiction to review the cost

allocation and rate design methodologies adopted by the governing
body of a municipally owned utility subject to this section. If the
commission finds that the cost-of-service methodologies result in
rates that are unjust, unreasonable, or unreasonably discriminatory
or unduly preferential to a customer class, the commission may order
the implementation of ratesetting methodologies the commission finds
reasonable. The commission's jurisdiction under this subsection does
not include intra-class residential rate design.
(i) An intervenor in an appeal under this section is limited to
presenting evidence on cost allocation and rate design methodologies,
except that an intervenor may present evidence in support of the
municipality on an issue related to utility revenues.
(j) A ratepayer of a municipally owned utility subject to this
section who resides outside the municipality may elect to petition
for review under either this section or Subchapter D when appealing a
rate ordinance or other ratesetting action of the governing body of a
municipality.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

CHAPTER 34. FACILITY FUNDING

SUBCHAPTER A. TEXAS ENERGY FUND; GRANTS AND LOANS
Sec. 34.0101. DEFINITIONS. In this subchapter:
(1) "Advisory committee" means the Texas Energy Fund
Advisory Committee.
(2) "Fund" means the Texas energy fund established by
Section 49-q, Article III, Texas Constitution.
(3) "Trust company" means the Texas Treasury Safekeeping
Trust Company.

Added by Acts 2023, 88th Leg., R.S., Ch. 465 (S.B. 2627), Sec. 2, eff.
November 7, 2023.

Sec. 34.0102. FUND. (a) The fund is a special fund in the

state treasury outside the general revenue fund to be administered
and used by the commission for the purposes authorized by this
chapter. The commission may establish separate accounts in the fund.
(b) The fund and the fund's accounts are kept and held by the

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trust company for and in the name of the commission.

(c) Money deposited to the credit of the fund may be used only
as provided by this chapter.
(d) The fund consists of:
(1) money appropriated, credited, transferred, or deposited
to the credit of the fund by or as authorized by law, including money
from any source transferred or deposited to the credit of the fund at
the commission's discretion;
(2) revenue that the legislature by statute dedicates for
deposit to the credit of the fund;
(3) investment earnings and interest earned on money in the
fund; and
(4) gifts, grants, and donations contributed to the fund.

Added by Acts 2023, 88th Leg., R.S., Ch. 465 (S.B. 2627), Sec. 2, eff.
November 7, 2023.

Sec. 34.0103. GRANTS FOR FACILITIES OUTSIDE ERCOT POWER REGION.

(a) The commission may use money in the fund without further
appropriation to provide grants to be used for transmission and
distribution infrastructure and electric generating facilities in
this state outside the ERCOT power region for:
(1) facility modernization;
(2) facility weatherization;
(3) reliability and resiliency facility enhancements; or
(4) vegetation management.
(b) In evaluating an application for a grant under this
section, the commission:
(1) shall evaluate whether the project for which the grant
is requested is reasonable; and
(2) may consider any other appropriate factors.
(c) Information submitted to the commission in an application
for a grant under this section is confidential and not subject to
disclosure under Chapter 552, Government Code.
(d) Proceeds of a grant received under this section may not be
used for:
(1) compliance with weatherization standards adopted before
December 1, 2023; or
(2) debt payments.

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Added by Acts 2023, 88th Leg., R.S., Ch. 465 (S.B. 2627), Sec. 2, eff.
November 7, 2023.

For expiration of this section, see Subsection (m).

Sec. 34.0104. LOANS FOR ERCOT POWER REGION. (a) The commission
may use money in the fund without further appropriation to provide
loans to finance upgrades to existing dispatchable electric
generating facilities providing power for the ERCOT power region that
result in a net increase of at least 100 megawatts of capacity for
each facility or the construction of dispatchable electric generating
facilities providing power for the ERCOT power region that each have
a generation capacity of at least 100 megawatts. For the purposes of
this section, a generating facility is considered to be dispatchable
if the facility's output can be controlled primarily by forces under
human control. An electric energy storage facility is not eligible
for a loan under this section.
(b) The commission may provide a construction loan under this
section only:
(1) for construction of a facility that will have a
generation capacity of at least 100 megawatts and that does not meet
the planning model requirements necessary to be included in the
Capacity Demand and Reserves Report of the independent organization
certified under Section 39.151 for the ERCOT power region before June
1, 2023;
(2) in an amount that does not exceed 60 percent of the
estimated cost of the facility to be constructed; and
(3) if the agreement ensures that the loan is to be the
senior debt secured by the facility.
(c) The commission shall evaluate an application for a loan
under this section based on:
(1) the applicant's:
(A) quality of services and management;
(B) efficiency of operations;
(C) history of electricity generation operations in
this state and this country;
(D) resource operation attributes;
(E) ability to address regional and reliability needs;
(F) access to resources essential for operating the
facility for which the loan is requested, such as land, water, and

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reliable infrastructure, as applicable; and

(G) evidence of creditworthiness and ability to repay
the loan on the terms established in the loan agreement, including
the applicant's total assets, total liabilities, net worth, and
credit ratings issued by major credit rating agencies;
(2) the generation capacity and estimated costs of the
project for which the loan is requested; and
(3) any other factors the commission considers appropriate.
(d) Outstanding loans provided under this section and grants
provided under Section 34.0105, considered together, may not support
the addition or construction of more than 10,000 megawatts of
generation capacity.
(e) An electric utility other than a river authority may not
receive a loan under this section.
(f) A loan provided under this section must:
(1) have a term of 20 years;
(2) be payable ratably starting on the third anniversary of
the estimated commercial operation date of the facility for which the
loan was provided, as stated in the loan application; and
(3) bear an interest rate of three percent.
(g) The commission shall require each recipient of a loan under
this section to deposit in an escrow account held by the comptroller
an amount of money equal to three percent of the estimated cost of
the project for which the loan is provided. The deposit must be made
before the initial loan funds are disbursed. The loan recipient may
not withdraw the deposit unless authorized by the commission.
(h) For money deposited under Subsection (g) for a loan for the
construction of a new facility, the commission:
(1) shall authorize the loan recipient to withdraw the
deposit from the escrow account if the facility for which the loan
was provided is interconnected in the ERCOT power region before the
fourth anniversary of the date the initial loan funds were disbursed;
or
(2) after the fourth anniversary of the date the initial
loan funds were disbursed, may authorize the loan recipient to
withdraw the deposit from the escrow account if the facility for
which the loan was provided is interconnected in the ERCOT power
region not later than the fifth anniversary of the date the initial
loan funds were disbursed and the commission determines that
extenuating circumstances justify the delay in completion.

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(i) For money deposited under Subsection (g) for a loan for an
upgrade to an existing facility, the commission:
(1) shall authorize the loan recipient to withdraw the
deposit from the escrow account if the project for which the loan was
provided is completed before the third anniversary of the date the
initial loan funds were disbursed; or
(2) after the third anniversary of the date the initial
loan funds were disbursed, may authorize the loan recipient to
withdraw the deposit from the escrow account if the project for which
the loan was provided is completed not later than the fourth
anniversary of the date the initial loan funds were disbursed and the
commission determines that extenuating circumstances justify the
delay in completion.
(j) The comptroller shall deposit to the credit of the fund any
escrow funds described by Subsection (g) that the commission may not
authorize to be withdrawn by a loan recipient.
(k) Information submitted to the commission in an application
for a loan under this section is confidential and not subject to
disclosure under Chapter 552, Government Code.
(l) The commission may not disburse the initial funds for a
loan under this section after December 31, 2025.
(m) This section expires September 1, 2050.

Added by Acts 2023, 88th Leg., R.S., Ch. 465 (S.B. 2627), Sec. 2, eff.
November 7, 2023.

For expiration of this section, see Subsection (j).

Sec. 34.0105. COMPLETION BONUS GRANTS. (a) The commission
shall provide, using money available in the fund for the purpose
without further appropriation, a completion bonus grant for the
construction of dispatchable electric generating facilities in the
ERCOT power region. For the purposes of this section, a generating
facility is considered to be dispatchable if the facility's output
can be controlled primarily by forces under human control. An
electric energy storage facility is not eligible for a grant under
this section.
(b) The amount of a grant under this section must be based on
the megawatts of capacity provided to the ERCOT power region by the
facility.

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(c) The commission may provide a grant under this section only
for construction of a facility that:
(1) will have a generation capacity of at least 100
megawatts; and
(2) does not meet the planning model requirements necessary
to be included in the Capacity Demand and Reserves Report of the
independent organization certified under Section 39.151 for the ERCOT
power region before June 1, 2023.
(d) The commission shall evaluate an application for a grant
under this section based on:
(1) the applicant's:
(A) quality of services and management;
(B) efficiency of operations;
(C) history of electricity generation operations in
this state and this country;
(D) resource operation attributes; and
(E) ability to address regional and reliability needs;
(2) the generation capacity and estimated construction
costs of the facility for which the grant is requested; and
(3) any other factors the commission considers appropriate.
(e) Information submitted to the commission in an application
for a grant under this section is confidential and not subject to
disclosure under Chapter 552, Government Code.
(f) Unless the commission determines that extenuating
circumstances justify extending the deadlines provided by this
subsection, the commission may not provide a grant under this section
of more than:
(1) $120,000 per megawatt of capacity provided by a
facility that is interconnected in the ERCOT power region before June
1, 2026; or
(2) $80,000 per megawatt of capacity provided by a facility
that is interconnected in the ERCOT power region on or after June 1,
2026, and before June 1, 2029.
(g) Unless the commission determines that extenuating
circumstances justify extending the deadline provided by this
subsection, the commission may not provide a grant under this section
for a facility that is interconnected in the ERCOT power region on or
after June 1, 2029.
(h) The commission shall provide for the proceeds of each grant
awarded under this section to be disbursed to the grant recipient by

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equal annual payments over a 10-year period that begins on the first
anniversary of the commercial operations date of the facility for
which the grant is provided. The annual payments are subject to
being withheld or discounted in accordance with Subsection (i). The
total of the annual disbursements may not exceed the maximum amount
as limited by Subsection (f).
(i) The commission by rule shall establish performance
standards for grant recipients based on reliability metrics,
appropriate for the types of facilities for which grants may be
provided, for performance during the 100 hours with the least
quantity of operating reserves for each year. The commission may not
disburse a grant recipient's annual payment under Subsection (h) if
the performance of the facility for which the grant was provided is
equal to or below the median performance standard established under
this subsection during a test period designated by the commission for
that year. The commission may disburse a discounted amount of a grant
recipient's annual payment under Subsection (h) if the performance of
the facility for which the grant was provided is above the median
performance standard established under this subsection during a test
period designated by the commission for that year but less than an
optimal performance standard established by the commission. The
commission shall by rule adopt a system for determining the amount by
which the commission will discount an annual payment based on
facility performance under this subsection.
(j) This section expires December 1, 2040.

Added by Acts 2023, 88th Leg., R.S., Ch. 465 (S.B. 2627), Sec. 2, eff.
November 7, 2023.

Sec. 34.0106. LOAN AND GRANT RESTRICTIONS. (a) If the

commission has more than four pending applications for loans to be
made from the fund on the date the commission awards a loan, the
amount of the loan awarded may not exceed 25 percent of the fund
balance on that date.
(b) The commission may not provide a loan or a grant under this
chapter:
(1) for a facility that will be used primarily to serve an
industrial load or private use network; or
(2) for the construction or operation of a natural gas

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transmission pipeline.
(c) The commission shall require each recipient of a loan under
this chapter to enter into a debt covenant that requires the
recipient to meet facility performance standards adopted by the
commission. The commission by rule shall adopt performance standards
for the purposes of this subsection based on reliability metrics
appropriate for the types of facilities for which loans may be
provided.
(d) Each facility for which a loan or grant is provided under
Section 34.0104 or 34.0105 must participate in the ERCOT wholesale
electricity market.
(e) The commission may provide from the fund:
(1) for grants under Section 34.0103, not more than $1
billion;
(2) for loans and grants under Sections 34.0104 and
34.0105, not more than $7.2 billion; and
(3) for grants or loans under Subchapter B, not more than
$1.8 billion.

Added by Acts 2023, 88th Leg., R.S., Ch. 465 (S.B. 2627), Sec. 2, eff.
November 7, 2023.

Sec. 34.0107. MANAGEMENT AND INVESTMENT OF FUND. (a) The

trust company shall hold and invest the fund, and any accounts
established in the fund, for and in the name of the commission,
taking into account the purposes for which money in the fund may be
used. The fund may be invested with the state treasury pool and
commingled with other investments.
(b) The overall objective for the investment of the fund is to
maintain sufficient liquidity to meet the needs of the fund while
striving to preserve the purchasing power of the fund over a full
economic cycle.
(c) In managing the assets of the fund, the trust company may
acquire, exchange, sell, supervise, manage, or retain any kind of
investment that a prudent investor, exercising reasonable care,
skill, and caution, would acquire or retain in light of the purposes,
terms, distribution requirements, and other circumstances of the fund
then prevailing, taking into consideration the investment of all the
assets of the fund rather than a single investment.

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(d) The reasonable expenses of managing the fund's assets shall

be paid from the fund.
(e) The trust company annually shall provide a written report
to the commission and to the advisory committee with respect to the
investment of the fund.
(f) The trust company shall adopt a written investment policy
that is appropriate for the fund. The trust company shall present
the investment policy to the investment advisory board established
under Section 404.028, Government Code. The investment advisory
board shall submit to the trust company recommendations regarding the
policy.
(g) The commission annually shall provide to the trust company
a forecast of the cash flows into and out of the fund. The
commission shall provide updates to the forecasts as appropriate to
ensure that the trust company is able to achieve the objective
specified by Subsection (b).
(h) The trust company shall disburse money from the fund as
directed by the commission.

Added by Acts 2023, 88th Leg., R.S., Ch. 465 (S.B. 2627), Sec. 2, eff.
November 7, 2023.

Sec. 34.0108. RECEIVERSHIP OF DEFAULT GENERATING FACILITY. (a)

In this section, "default" means:
(1) default in payment of the principal of or interest on a
loan; or
(2) a failure to perform any of the terms of a loan.
(b) The state, including the commission, the advisory
committee, and the trust company, may not retain an ownership
interest in a project or facility for which a loan is provided under
this chapter.
(c) In the event of a default on a loan made under this
chapter, at the request of the commission, the attorney general shall
bring suit in a district court in Travis County for the appointment
of a receiver to collect the assets and carry on the business of a
loan recipient if the action is necessary to cure a default by the
recipient.
(d) The court shall vest a receiver appointed by the court with
any power or duty the court finds necessary to cure the default,

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including the power or duty to:

(1) perform audits;
(2) direct ongoing operation of the assets;
(3) fund reserve accounts;
(4) make payments of the principal of or interest on bonds,
securities, or other obligations; and
(5) take any other action necessary to prevent or to remedy
the default, including the sale of assets.
(e) The receiver shall execute a bond in an amount to be set by
the court to ensure the proper performance of the receiver's duties.
(f) After appointment and execution of bond, the receiver shall
take possession of the books, records, accounts, and assets of the
defaulting loan recipient specified by the court. Until discharged
by the court, the receiver shall perform the duties that the court
directs and shall strictly observe the final order involved.
(g) On a showing of good cause by the defaulting loan
recipient, the court may dissolve the receivership.

Added by Acts 2023, 88th Leg., R.S., Ch. 465 (S.B. 2627), Sec. 2, eff.
November 7, 2023.

Sec. 34.0109. TEXAS ENERGY FUND ADVISORY COMMITTEE. (a) The

advisory committee is composed of the following six members:
(1) three members of the senate appointed by the lieutenant
governor, including:
(A) a member of the committee of the senate having
primary jurisdiction over matters relating to the generation of
electricity; and
(B) a member of the committee of the senate having
primary jurisdiction over finance; and
(2) three members of the house of representatives appointed
by the speaker of the house of representatives, including:
(A) a member of the committee of the house of
representatives having primary jurisdiction over the generation of
electricity; and
(B) a member of the committee of the house of
representatives having primary jurisdiction over finance.
(b) A member of the advisory committee serves at the will of
the person who appointed the member.

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(c) The lieutenant governor shall appoint a co-presiding

officer of the advisory committee from among the members appointed by
the lieutenant governor. The speaker of the house of representatives
shall appoint a co-presiding officer of the advisory committee from
among the members appointed by the speaker.
(d) The advisory committee may hold public hearings, formal
meetings, and work sessions. Either co-presiding officer of the
advisory committee may call a public hearing, formal meeting, or work
session of the advisory committee at any time. The advisory
committee may not take formal action at a public hearing, formal
meeting, or work session unless a quorum of the committee is present.
(e) Except as otherwise provided by this subsection, a member
of the advisory committee is not entitled to receive compensation for
service on the committee or reimbursement for expenses incurred in
the performance of official duties as a member of the committee.
Service on the advisory committee by a member of the senate or house
of representatives is considered legislative service for which the
member is entitled to reimbursement and other benefits in the same
manner and to the same extent as for other legislative service.
(f) The advisory committee:
(1) may provide comments and recommendations to the
commission for the commission to use in adopting rules regarding the
use of the fund or on any other matter; and
(2) shall review the overall operation, function, and
structure of the fund at least semiannually.
(g) The advisory committee may adopt rules, procedures, and
policies as needed to administer this section and implement its
responsibilities.
(h) Chapter 2110, Government Code, does not apply to the size,
composition, or duration of the advisory committee.
(i) The advisory committee is subject to Chapter 325,
Government Code (Texas Sunset Act). Unless continued in existence as
provided by that chapter, the advisory committee is abolished
September 1, 2035.

Added by Acts 2023, 88th Leg., R.S., Ch. 465 (S.B. 2627), Sec. 2, eff.
November 7, 2023.

Sec. 34.0110. RULES. (a) The commission by rule may establish

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procedures for:
(1) the application for and award of a grant or loan under
this chapter; and
(2) the administration of the fund.
(b) The commission shall give full consideration to comments
and recommendations of the advisory committee.

Added by Acts 2023, 88th Leg., R.S., Ch. 465 (S.B. 2627), Sec. 2, eff.
November 7, 2023.

SUBCHAPTER B. TEXAS POWER PROMISE: BACKUP POWER PACKAGES

Sec. 34.0201. DEFINITION. In this subchapter, "Texas backup
power package" means a stand-alone, behind-the-meter, multiday backup
power source that can be used for islanding.

Added by Acts 2023, 88th Leg., R.S., Ch. 465 (S.B. 2627), Sec. 2, eff.
November 7, 2023.

Sec. 34.0202. PURPOSE. The purpose of this subchapter is to

facilitate and provide funding for the design, procurement,
installation, and use of Texas backup power packages to ensure the
reliability or adequacy of an electric power grid in this state for
facilities on which communities rely for health, safety, and well-
being.

Added by Acts 2023, 88th Leg., R.S., Ch. 465 (S.B. 2627), Sec. 2, eff.
November 7, 2023.

Sec. 34.0203. COMMISSION DUTIES. (a) The commission shall

convene an advisory committee in the manner provided by Chapter 2110,
Government Code.
(b) The advisory committee shall recommend criteria for the
commission to employ in making a grant or loan under this subchapter.
(c) The commission shall contract with a research entity that
has experience in microgrid design to analyze critical facility
characteristics and requirements in this state and develop for Texas
backup power packages:
(1) sets of specifications for standard backup power

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packages of various sizes that can serve most critical facilities in

this state; and
(2) specifications for standard interconnection,
communications, and controls for Texas backup power packages.

Added by Acts 2023, 88th Leg., R.S., Ch. 465 (S.B. 2627), Sec. 2, eff.
November 7, 2023.

Sec. 34.0204. TEXAS BACKUP POWER PACKAGES. The commission may

use money in the Texas energy fund without further appropriation to
provide a grant or loan for the operation of a Texas backup power
package that:
(1) is engineered to minimize operation costs;
(2) uses interconnection technology and controls that
enable immediate islanding from the power grid and stand-alone
operation for the host facility;
(3) is capable of operating for at least 48 continuous
hours without refueling or connecting to a separate power source;
(4) is designed so that one or more Texas backup power
packages can be aggregated on-site to serve not more than 2.5
megawatts of load at the host facility;
(5) provides power sourced from:
(A) a combination of natural gas or propane with
photovoltaic panels and battery storage; or
(B) battery storage on an electric school bus; and
(6) is not used by the owner or host facility for the sale
of energy or ancillary services.

Added by Acts 2023, 88th Leg., R.S., Ch. 465 (S.B. 2627), Sec. 2, eff.
November 7, 2023.

Sec. 34.0205. GRANTS AND LOANS. (a) The commission by rule

may establish procedures for the application for and award of a grant
or loan under this subchapter.
(b) The amount of a grant provided under this subchapter may
not exceed $500 per kilowatt of capacity.
(c) The commission may provide a loan under this subchapter for
procurement and operating costs.
(d) The commission shall maintain and publish a list of

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approved vendors eligible to assist with the sale, installation,

operation, and ongoing maintenance of Texas backup power packages.
(e) The commission may not provide a grant or loan under this
subchapter for:
(1) a commercial energy system, a private school, or a for-
profit entity that does not directly serve public safety and human
health; or
(2) a source of backup power that does not follow the
design and use standards of a Texas backup power package.

Added by Acts 2023, 88th Leg., R.S., Ch. 465 (S.B. 2627), Sec. 2, eff.
November 7, 2023.

CHAPTER 35. ENERGY PROVIDERS

SUBCHAPTER A. COMPETITION AND TRANSMISSION ACCESS IN THE WHOLESALE
MARKET
Sec. 35.001. DEFINITION. In this subchapter, "electric
utility" includes a municipally owned utility and an electric
cooperative.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 405, Sec. 16, eff. Sept. 1, 1999.

Sec. 35.002. RIGHT TO COMPETE AT WHOLESALE. A provider of

generation, including an electric utility affiliate, exempt wholesale
generator, and qualifying facility, may compete for the business of
selling power.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 35.0021. WEATHER EMERGENCY PREPAREDNESS. (a) This

section applies only to a municipally owned utility, electric
cooperative, power generation company, or exempt wholesale generator
that sells electric energy at wholesale in the ERCOT power region.
(b) The commission by rule shall require each provider of
electric generation service described by Subsection (a) to implement
measures to prepare the provider's generation assets to provide
adequate electric generation service during a weather emergency

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according to reliability standards adopted by the commission. In

adopting the rules, the commission shall take into consideration
weather predictions produced by the office of the state
climatologist.
(c) The independent organization certified under Section 39.151
for the ERCOT power region shall:
(1) inspect generation assets in the ERCOT power region for
compliance with the reliability standards;
(2) provide the owner of a generation asset with a
reasonable period of time in which to remedy any violation the
independent organization discovers in an inspection; and
(3) report to the commission any violation.
(c-1) The independent organization certified under Section
39.151 for the ERCOT power region shall prioritize inspections
conducted under Subsection (c)(1) based on risk level, as determined
by the organization.
(d) The commission by rule shall require a provider of electric
generation service described by Subsection (a) for a generation asset
that experiences repeated or major weather-related forced
interruptions of service to:
(1) contract with a person who is not an employee of the
provider to assess the provider's weatherization plans, procedures,
and operations for that asset; and
(2) submit the assessment to the commission and the
independent organization certified under Section 39.151 for the ERCOT
power region.
(e) The commission may require a provider of electric
generation service described by Subsection (a) to implement
appropriate recommendations included in an assessment submitted to
the commission under Subsection (d).
(f) The independent organization certified under Section 39.151
for the ERCOT power region shall review, coordinate, and approve or
deny requests by providers of electric generation service described
by Subsection (a) for a planned power outage during any season and
for any period of time.
(g) The commission shall impose an administrative penalty on an
entity, including a municipally owned utility or an electric
cooperative, that violates a rule adopted under this section and does
not remedy that violation within a reasonable period of time.

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Added by Acts 2021, 87th Leg., R.S., Ch. 426 (S.B. 3), Sec. 13, eff.
June 8, 2021.

Sec. 35.0022. SERVICE INTERRUPTION NOTIFICATIONS. (a) This

section applies only to a provider of electric generation service
described by Section 35.0021(a).
(b) The commission by rule shall require a provider of electric
generation service to provide to the independent organization
certified under Section 39.151 for the ERCOT power region the reason
for each unplanned service interruption. Not later than the third
business day after the service is restored, the independent
organization shall include the reason for each unplanned service
interruption in a publicly available report published on the
independent organization's Internet website.

Added by Acts 2023, 88th Leg., R.S., Ch. 410 (H.B. 1500), Sec. 8, eff.
September 1, 2023.

Sec. 35.003. PURCHASE FROM AFFILIATE; UNDUE PREFERENCE

PROHIBITED. (a) An electric utility may purchase power from an
affiliate in accordance with this title.
(b) An electric utility may not grant an undue preference to a
person in connection with the utility's purchase or sale of electric
energy at wholesale or other utility service.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 35.004. PROVISION OF TRANSMISSION SERVICE. (a) An

electric utility or transmission and distribution utility that owns
or operates transmission facilities shall provide wholesale
transmission service at rates and terms, including terms of access,
that are comparable to the rates and terms of the utility's own use
of its system.
(b) The commission shall ensure that an electric utility or
transmission and distribution utility provides nondiscriminatory
access to wholesale transmission service for qualifying facilities,
exempt wholesale generators, power marketers, power generation
companies, retail electric providers, and other electric utilities or

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transmission and distribution utilities.

(c) When an electric utility, electric cooperative, or
transmission and distribution utility provides wholesale transmission
service within ERCOT at the request of a third party, the commission
shall ensure that the utility recovers the utility's reasonable costs
in providing wholesale transmission services necessary for the
transaction from the entity for which the transmission is provided so
that the utility's other customers do not bear the costs of the
service.
(d) The commission shall price wholesale transmission services
within ERCOT based on the postage stamp method of pricing under which
a transmission-owning utility's rate is based on the ERCOT utilities'
combined annual costs of transmission, other than costs described by
Subsections (d-2) and (d-3), divided by the total demand placed on
the combined transmission systems of all such transmission-owning
utilities within a power region. An electric utility subject to the
freeze period imposed by Section 39.052 may treat transmission costs
in excess of transmission revenues during the freeze period as an
expense for purposes of determining annual costs in the annual report
filed under Section 39.257. Notwithstanding Section 36.201, the
commission may approve wholesale rates that may be periodically
adjusted to ensure timely recovery of transmission investment.
Notwithstanding Section 36.054(a), if the commission determines that
conditions warrant the action, the commission may authorize the
inclusion of construction work in progress in the rate base for
transmission investment required by the commission under Section
39.203(e).
(d-1) The commission by rule shall establish a reasonable
allowance for transmission-owning utility costs incurred to
interconnect generation resources directly with the ERCOT
transmission system at transmission voltage. The allowance must take
into account:
(1) the potential to reduce the costs to consumers of
generation interconnection;
(2) historical generation interconnection costs; and
(3) any other factor that the commission considers
reasonable to accomplish the goal of this subsection.
(d-2) Costs in excess of the transmission-owning utility
allowance provided by Subsection (d-1) incurred to interconnect
generation resources with the ERCOT transmission system must be

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directly assigned to and collected from the generation resource

interconnecting through the facilities.
(d-3) Not later than September 1 of every fifth year, the
commission shall review and may adjust the allowance provided by
Subsection (d-1) to account for inflation or supply chain issues.
(e) In this section, "ancillary services" means services
necessary to facilitate the transmission of electric energy including
load following, standby power, backup power, reactive power, and any
other services as the commission may determine by rule.
(f) The commission shall ensure that ancillary services
necessary to facilitate the transmission of electric energy are
available at reasonable prices with terms and conditions that are not
unreasonably preferential, prejudicial, discriminatory, predatory, or
anticompetitive. On the introduction of customer choice in the
ERCOT power region, acquisition of generation-related ancillary
services on a nondiscriminatory basis by the independent organization
in ERCOT on behalf of entities selling electricity at retail shall be
deemed to meet the requirements of this subsection.
(g) The commission shall:
(1) review the type, volume, and cost of ancillary services
to determine whether those services will continue to meet the needs
of the electricity market in the ERCOT power region; and
(2) evaluate whether additional services are needed for
reliability in the ERCOT power region while providing adequate
incentives for dispatchable generation.
(h) The commission shall require the independent organization
certified under Section 39.151 for the ERCOT power region to modify
the design, procurement, and cost allocation of ancillary services
for the region in a manner consistent with cost-causation principles
and on a nondiscriminatory basis.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 405, Sec. 17, eff. Sept. 1, 1999; Acts
2003, 78th Leg., ch. 295, Sec. 1, eff. June 18, 2003.
Amended by:
Acts 2021, 87th Leg., R.S., Ch. 426 (S.B. 3), Sec. 14, eff. June
8, 2021.
Acts 2023, 88th Leg., R.S., Ch. 410 (H.B. 1500), Sec. 9, eff.
September 1, 2023.

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Sec. 35.005. AUTHORITY TO ORDER TRANSMISSION SERVICE. (a) The

commission may require an electric utility to provide transmission
service at wholesale to another electric utility, a qualifying
facility, an exempt wholesale generator, or a power marketer and may
determine whether terms for the transmission service are reasonable.
(b) The commission may require transmission service at
wholesale, including the construction or enlargement of a facility.
(c) The commission may not issue a decision or rule relating to
transmission service that is contrary to an applicable decision,
rule, or policy statement of a federal regulatory agency having
jurisdiction.
(d) This subsection applies only to a facility in the ERCOT
power region for which a loan or grant is provided under Subchapter
A, Chapter 34. The independent organization certified under Section
39.151 for the ERCOT power region shall work with electric utilities
to ensure that each facility in the ERCOT power region for which a
loan or grant is provided is fully interconnected in the region not
later than the date the facility is ready for commercial operation.
The independent organization certified under Section 39.151 for the
ERCOT power region shall give priority to interconnecting each
facility for which a loan or grant is provided except that the
organization shall prioritize transmission projects that the
organization has formally designated as critical for reliability over
a facility for which a loan or grant is provided. An electric
utility that enters into an interconnection agreement for a facility
for which a loan or grant is provided shall give priority to
interconnecting the facility and complete construction of any other
facilities necessary to interconnect the facility not later than the
date the facility is ready for commercial operation except that the
utility shall prioritize transmission projects that the independent
organization certified under Section 39.151 for the ERCOT power
region has formally designated as critical for reliability over a
facility for which a loan or grant is provided.
(e) If the commission receives an application under Chapter 37
for a certificate of convenience and necessity related to facilities
necessary to interconnect a facility to which Subsection (d) applies
and does not approve the application before the 90th day after the
date the commission received the application, the deadline
established by Subsection (d) is extended one day for each day after
the 90th day in which the commission does not approve the

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application.
(f) The commission may extend the deadline established by
Subsection (d) after notice, hearing, and a determination on a
showing of good cause that fully interconnecting the facility before
the deadline is not feasible.
(g) In this subsection, "Texas backup power package" has the
meaning assigned by Section 34.0201. The commission by rule shall
adopt procedures to expedite an electric utility interconnection
request for a Texas backup power package for which a loan or grant is
awarded under Chapter 34.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 405, Sec. 18, eff. Sept. 1, 1999.
Amended by:
Acts 2023, 88th Leg., R.S., Ch. 465 (S.B. 2627), Sec. 3, eff.
November 7, 2023.

Sec. 35.006. RULES RELATED TO WHOLESALE TRANSMISSION SERVICE,

RATES, AND ACCESS. (a) The commission shall adopt rules relating to
wholesale transmission service, rates, and access. The rules:
(1) must be consistent with the standards in this
subchapter;
(2) may not be contrary to federal law, including any
applicable decision, rule, or policy statement of a federal
regulatory agency having jurisdiction;
(3) must require transmission services that are not less
than the transmission services the Federal Energy Regulatory
Commission may require in similar circumstances;
(4) must require that an electric utility provide all
ancillary services associated with the utility's discounted wholesale
sales at the same prices and under the same terms as the services are
provided to a third person; and
(5) must require that an electric utility provide all
ancillary services associated with the utility's discounted wholesale
sales to a third person on request.
(b) The commission shall adopt rules relating to the
registration and reporting requirements of a qualifying facility,
exempt wholesale generator, and power marketer.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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Sec. 35.007. TARIFFS REQUIRED. (a) Except as provided by

Subsection (b), an electric utility that owns or operates a
transmission facility shall file a tariff in compliance with
commission rules adopted under Section 35.006.
(b) An electric utility is not required to file a tariff under
this section if the utility's terms for access and pricing for
wholesale transmission service are included in another electric
utility's tariff.
(c) An electric utility shall file a tariff required by this
section with the appropriate state or federal regulatory agency
having jurisdiction over the utility's transmission service.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 35.008. ALTERNATIVE DISPUTE RESOLUTION. The commission

may require that each party to a dispute concerning prices or terms
of wholesale transmission service engage in a nonbinding alternative
dispute resolution process before seeking resolution of the dispute
by the commission.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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

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(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.

Added by Acts 2015, 84th Leg., R.S., Ch. 1162 (S.B. 776), Sec. 2,
eff. September 1, 2015.

Sec. 35.010. COSTS RELATED TO REPORTING ON SAFETY PROCESSES AND

INSPECTIONS FOR CERTAIN UTILITIES. (a) This section applies only to
a municipally owned utility or electric cooperative that has
wholesale transmission rates established by the commission.
(b) Costs incurred by a municipally owned utility or electric
cooperative to comply with Section 38.102 shall be recorded as a
regulatory asset for timely recovery in wholesale transmission rates
established by the commission.
(c) The commission may adopt rules relating to the recording of
regulatory assets under this section.

Added by Acts 2019, 86th Leg., R.S., Ch. 1320 (H.B. 4150), Sec. 2,
eff. September 1, 2019.

SUBCHAPTER B. EXEMPT WHOLESALE GENERATORS, DISTRIBUTED NATURAL GAS

GENERATION FACILITIES, AND POWER MARKETERS
Sec. 35.031. AUTHORITY TO OPERATE. An exempt wholesale
generator or power marketer may sell electric energy only at
wholesale.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 35.032. COMMISSION REGISTRATION AND REQUIRED REPORTS. (a)

An exempt wholesale generator or power marketer that sells electric
energy in this state shall, not later than the 30th day after the
date it becomes subject to this section:
(1) register with the commission; or
(2) provide to the commission proof that it has registered
with the Federal Energy Regulatory Commission or has been authorized
by the Federal Energy Regulatory Commission to sell electric energy
at market-based rates.

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(b) The exempt wholesale generator or power marketer may

register by filing with the commission:
(1) a description of the location of any facility used to
provide service;
(2) a description of the type of service provided;
(3) a copy of any information filed with the Federal Energy
Regulatory Commission in connection with registration with that
commission; and
(4) other information required by commission rule.
(c) An exempt wholesale generator or power marketer required to
register under Subsection (a) shall file any report required by
commission rule.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 35.033. AFFILIATE WHOLESALE PROVIDER. An affiliate of an

electric utility may be an exempt wholesale generator or power
marketer and may sell electric energy to its affiliated electric
utility in accordance with laws governing wholesale sales of electric
energy.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 405, Sec. 19, eff. Sept. 1, 1999.

Sec. 35.034. TRANSFER OF ASSETS. (a) Unless an electric

utility receives commission approval under Subsection (b), the
utility may not sell or transfer a facility to an affiliate or
otherwise consider the facility to be an eligible facility as defined
by federal law if on May 27, 1995, the utility had a rate or charge
in effect:
(1) for or in connection with the construction of the
facility;
(2) for electric energy produced by the construction of the
facility; or
(3) for electric energy produced by the facility other than
a portion of a rate or charge that represents recovery of the cost of
a wholesale rate or charge.
(b) The commission, after notice and hearing, may allow an
electric utility to sell or transfer a facility governed by

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Subsection (a) to an affiliate or otherwise allow the facility to

become an eligible facility only if the transaction:
(1) will benefit ratepayers of the utility making the sale
or transfer;
(2) is in the public interest; and
(3) otherwise complies with state law.
(c) For purposes of this section, "electric utility" does not
include a river authority.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 405, Sec. 20, eff. Sept. 1, 1999.

Sec. 35.035. VALUATION AND ACCOUNTING OF TRANSFERRED ASSETS.

(a) A transfer of assets from an electric utility to an affiliated
exempt wholesale generator or power marketer shall be valued at the
greater of net book cost or fair market value.
(b) A transfer of assets from an exempt wholesale generator or
power marketer to an affiliated electric utility shall be valued at
the lesser of net book cost or fair market value.
(c) At the time that a transfer of assets between an electric
utility and an affiliated exempt wholesale generator or power
marketer is approved, the commission shall order the utility to
adjust its rates so that the utility's tariffs reflect benefits from
the proceeds of the sale and exclude any costs associated with the
transferred facility.
(d) For purposes of this section, "electric utility" does not
include a river authority.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 405, Sec. 21, eff. Sept. 1, 1999.

Sec. 35.036. DISTRIBUTED NATURAL GAS GENERATION FACILITIES.

(a) A person who owns or operates a distributed natural gas
generation facility may sell electric power generated by the
facility. The electric utility, electric cooperative, or retail
electric provider that provides retail electricity service to the
facility may purchase electric power tendered to it by the owner or
operator of the facility at a value agreed to by the electric
utility, electric cooperative, or retail electric provider and the

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owner or operator of the facility. The value of the electric power

may be based wholly or partly on the clearing price of energy at the
time of day and at the location at which the electric power is made
available to the electric grid.
(b) At the request of the owner or operator of the distributed
natural gas generation facility, the electric utility or electric
cooperative shall allow the owner or operator of the facility to use
transmission and distribution facilities to transmit the electric
power to another entity that is acceptable to the owner or operator
in accordance with commission rules or a tariff approved by the
Federal Energy Regulatory Commission.
(c) Subject to Subsections (e) and (f), if the owner or
operator of a distributed natural gas generation facility requests to
be interconnected to an electric utility or electric cooperative that
does not have a transmission tariff approved by the Federal Energy
Regulatory Commission, the electric utility or electric cooperative
may recover from the owner or operator of the facility the reasonable
costs of interconnecting the facility with the electric utility or
electric cooperative that are necessary for and directly attributable
to the interconnection of the facility.
(d) Subject to Subsections (e) and (f), an electric utility or
electric cooperative may recover from the owner or operator of a
distributed natural gas generation facility the reasonable costs of
electric facility upgrades and improvements if:
(1) the rated capacity of the distributed natural gas
generation facility is greater than the rated capacity of the
electric utility or electric cooperative; and
(2) the costs are necessary for and directly attributable
to accommodating the distributed natural gas generation facility's
capacity.
(e) An electric utility or electric cooperative may recover
costs under Subsection (c) or (d) only if:
(1) the electric utility or electric cooperative provides a
written good faith cost estimate to the owner or operator of the
distributed natural gas generation facility; and
(2) the owner or operator of the distributed natural gas
generation facility agrees in writing to pay the reasonable and
necessary costs of interconnection or capacity accommodation
requested by the owner or operator and described in the estimate
before the electric utility or electric cooperative incurs the costs.

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(f) If an electric utility or electric cooperative seeks to

recover from the owner or operator of a distributed natural gas
generation facility an amount that exceeds the amount in the estimate
provided under Subsection (e) by more than five percent, the
commission shall resolve the dispute at the request of the owner or
operator of the facility.
(g) A distributed natural gas generation facility must comply
with emissions limitations established by the Texas Commission on
Environmental Quality for a standard emissions permit for an electric
generation facility unit installed after January 1, 1995.
(h) This section does not require an electric cooperative to
transmit electricity to a retail point of delivery in the
certificated service area of the electric cooperative if the electric
cooperative has not adopted customer choice.

Added by Acts 2011, 82nd Leg., R.S., Ch. 890 (S.B. 365), Sec. 3, eff.
September 1, 2011.

Sec. 35.037. INTERCONNECTION AND OPERATION OF CERTAIN

DISTRIBUTED GENERATION FACILITIES FOR FOOD SUPPLY CHAIN. (a) In this
section:
(1) "Customer" means a retail electric customer:
(A) with a distributed generation facility installed on
the retail electric customer's side of the meter; and
(B) that has a primary purpose of or derives a material
source of revenue from:
(i) retail grocery sales; or
(ii) food manufacturing or distribution for retail
grocery sales.
(2) "Distributed generation facility" means a facility
installed on the customer's side of the meter but separately metered
from the customer:
(A) with a nameplate capacity of at least 250 kilowatts
and not more than 10 megawatts;
(B) that is capable of generating and providing backup
or supplementary power to the customer's premises; and
(C) that is owned or operated by a person registered as
a power generation company in accordance with Section 39.351.
(b) This section only applies in the ERCOT power region in

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areas where retail customer choice has not been implemented.

(c) A person who owns or operates a distributed generation
facility served by a municipally owned utility or electric
cooperative in the ERCOT power region may sell electric power
generated by the distributed generation facility at wholesale,
including the provision of ancillary services, subject to the
limitations of this section.
(d) A person who owns or operates a distributed generation
facility may sell electric power generated by the distributed
generation facility at wholesale to a municipally owned utility or
electric cooperative certificated for retail service to the area
where the distributed generation facility is located or to a related
generation and transmission electric cooperative. The municipally
owned utility or electric cooperative shall purchase at wholesale the
quantity of electric power generated by the distributed generation
facility needed to satisfy the full electric requirements of the
customer on whose side of the meter the distributed generation
facility is installed and operated at a wholesale price agreed to by
the customer and shall resell that quantity of power at retail to the
customer at the rate applicable to the customer for retail service,
which must at minimum include all amounts paid for the wholesale
electric power, during:
(1) an emergency declared by the independent organization
certified under Section 39.151 for the ERCOT power region that
creates the potential for interruption of service to the customer;
(2) any service interruption at the customer's premises;
(3) construction on the customer's premises that creates
the potential for interruption of service to the customer;
(4) maintenance and testing of the distributed generation
facility; and
(5) additional times mutually agreed on by the owner or
operator of the distributed generation facility and the municipally
owned utility or electric cooperative.
(e) The customer shall provide written notice as soon as
reasonably practicable to the municipally owned utility or electric
cooperative of a circumstance described by Subsection (d)(3) or (4).
(f) In addition to a sale authorized under Subsection (d), on
request by an owner or operator of a distributed generation facility,
the municipally owned utility or electric cooperative shall provide
wholesale transmission service to the distributed generation facility

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owner in the same manner as to other power generation companies for

the sale of power from the distributed generation facility at
wholesale, including for the provision of ancillary services, in the
ERCOT market. The distributed generation facility owner shall comply
with all applicable commission rules and protocols and with governing
documents of the independent organization certified under Section
39.151 for the ERCOT power region. This section does not require a
municipally owned utility or electric cooperative to transmit
electricity to a retail point of delivery in the certificated service
area of the municipally owned utility or electric cooperative.
(g) In addition to a sale authorized under Subsection (d) or
(f), a municipally owned utility or electric cooperative or related
generation and transmission electric cooperative may purchase
electric power provided by the owner or operator of the distributed
generation facility at wholesale at a mutually agreed on price. The
price may be based wholly or partly on the ERCOT market clearing
price of energy at the time of day and at the location at which the
electric power is made available.
(h) A municipally owned utility or electric cooperative shall
make available a standard interconnection application and agreement
for distributed generation facilities that is substantially similar
to the commission's interconnection agreement form and consistent
with this section to facilitate the connection of distributed
generation facilities. A municipally owned utility or electric
cooperative shall allow interconnection of a distributed generation
facility and provide to a distributed generation facility on a
nondiscriminatory basis wholesale transmission service, including at
distribution voltage, in the same manner as for other power
generation companies to transmit to the ERCOT power grid the electric
power generated by the distributed generation facility. A municipally
owned utility or electric cooperative may recover from the owner or
operator of the distributed generation facility all reasonable costs
necessary for and directly attributable to the interconnection of the
facility, including the reasonable costs of necessary system upgrades
and improvements directly attributable to the distributed generation
facility.
(i) Not later than the 30th day after the date a complete
application for interconnection of a distributed generation facility
is received, the municipally owned utility or electric cooperative
shall provide the applicant with a written good faith cost estimate

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for interconnection-related costs. The municipally owned utility or

electric cooperative may not incur any interconnection-related costs
without entering into a written agreement for the payment of those
costs by the applicant.
(j) The process to interconnect a distributed generation
facility must be completed not later than the 240th day after the
date the municipally owned utility or electric cooperative receives
payment of all estimated costs to complete the interconnection,
except that:
(1) the period may be extended by written agreement between
the parties; or
(2) the period may be extended after a good faith showing
by the municipally owned utility or electric cooperative that the
interconnection requires improvements, upgrades, or construction of
new facilities that cannot reasonably be completed within that
period, in which case the period may be extended for a time not to
exceed the time necessary for the improvements, upgrades, or
construction of new facilities to be completed.
(k) A municipally owned utility or electric cooperative shall
charge the owner or operator of a distributed generation facility
rates on a reasonable and nondiscriminatory basis for providing
wholesale transmission service to the distributed generation facility
owner in the same manner as for other power generation companies to
transmit to the ERCOT power grid the electric power generated by the
distributed generation facility in accordance with a tariff filed by
the municipally owned utility or electric cooperative with the
commission.
(l) The owner or operator of the distributed generation
facility shall contract with the municipally owned utility or
electric cooperative or the municipally owned utility's or electric
cooperative's designee for any scheduling, settlement, communication,
telemetry, or other services required to participate in the ERCOT
wholesale market, but only to the extent that the utility,
cooperative, or designee offers the services on a nondiscriminatory
basis and at a commercially reasonable cost. If the municipally owned
utility or electric cooperative or the municipally owned utility's or
electric cooperative's designee does not offer or declines to offer
the services, or fails to do so on a nondiscriminatory basis and at a
commercially reasonable cost as determined by quotes from at least
three third parties providing the same services, the owner or

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operator of the distributed generation facility may contract with a

third party provider to obtain the services.
(m) A distributed generation facility must comply with
emissions limitations established by the Texas Commission on
Environmental Quality for a standard emissions permit for an electric
generation facility unit installed after January 1, 1995.
(n) A municipally owned utility or electric cooperative is not
required to interconnect a distributed generation facility under this
section if, on the date the utility or cooperative receives an
application for interconnection of the facility, the municipally
owned utility or electric cooperative has interconnected distributed
generation facilities with an aggregate capacity that equals the
lesser amount of:
(1) 5 percent of the municipally owned utility's or
electric cooperative's average of the 15-minute summer peak load
coincident with the independent system operator's 15-minute summer
peak load in each of the months of June, July, August, and September;
or
(2) 300 megawatts, adjusted annually by the percentage of
total system load growth in the ERCOT power region beginning in 2022.
(o) A municipally owned utility or electric cooperative that,
on the date the utility or cooperative receives an application for
interconnection of a distributed generation facility, has
interconnected distributed generation facilities with an aggregate
capacity less than the threshold described by Subsection (n) is
required to increase that capacity only up to that threshold.
(p) This section is not intended to change registration
standards or other qualifications required by the independent
organization certified under Section 39.151 for the ERCOT power
region related to the participation of distributed generation
facilities in the wholesale market. This section is not intended to
allow distributed generation facilities to participate in a manner
that is not technically feasible or that is otherwise in conflict
with wholesale rules and requirements adopted by the independent
organization certified under Section 39.151 for the ERCOT power
region.

Added by Acts 2021, 87th Leg., R.S., Ch. 561 (S.B. 398), Sec. 3, eff.
September 1, 2021.

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Sec. 35.038. FACILITATING CERTAIN INTERCOMPANY LANDFILL GAS-TO-

ELECTRICITY USE. (a) This section only applies in a county with a
population of more than 1.2 million in which a national wildlife
refuge is wholly or partly located.
(b) Notwithstanding any other provision of this title, and for
the purposes of reducing environmental emissions, putting to a
beneficial purpose landfill gas as an electric generation fuel that
would otherwise be flared, enabling the operation of electric
generation to a greater degree, and enhancing the reliability and
resilience of electric service in this state, a person who is not an
electric utility and who owns and operates equipment or facilities to
produce, generate, transmit, distribute, store, sell, or furnish
electricity produced by the use of landfill methane gas may:
(1) use the equipment or facilities to provide electricity
and electric service to the person and to the person's affiliates
without being considered to be an electric utility, a public utility,
a retail electric provider, a power marketer, or a person providing
aggregation;
(2) interconnect the equipment or facilities in a timely
manner and on reasonable and nondiscriminatory terms and conditions
with any electric utility, municipally owned utility, or electric
cooperative that has a retail service area for any portion of the
equipment or facilities; and
(3) receive backup, supplemental, or other electric service
for any of the person's or the person's affiliates' facilities that
consume electricity from any electric utility, municipally owned
utility, or electric cooperative that has a retail service area for
any portion of the person's facilities or equipment that are
interconnected regardless of whether those facilities are in the same
retail service area as the location of the interconnection point.
(c) Backup, supplemental, or other electric service provided
under this section through an interconnection for a person's
electricity-consuming facilities that are connected to the person's
interconnected equipment or facilities does not constitute a service
area encroachment or other violation of law by the electric utility,
municipally owned utility, or electric cooperative supplying the
backup, supplemental, or other electric service.

Added by Acts 2021, 87th Leg., R.S., Ch. 426 (S.B. 3), Sec. 15, eff.
June 8, 2021.

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Amended by:
Acts 2023, 88th Leg., R.S., Ch. 644 (H.B. 4559), Sec. 270, eff.
September 1, 2023.
Redesignated from Utilities Code, Section 35.037 by Acts 2023, 88th
Leg., R.S., Ch. 768 (H.B. 4595), Sec. 24.001(61), eff. September 1,
2023.

SUBCHAPTER C. QUALIFYING FACILITIES

Sec. 35.061. ENCOURAGEMENT OF ECONOMICAL PRODUCTION. The
commission shall adopt and enforce rules to encourage the economical
production of electric energy by qualifying facilities.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 35.062. APPLICATION FOR CERTIFICATION. (a) An electric

utility or a qualifying facility may submit to the commission for
certification a copy of an agreement between the utility and facility
for the purchase of capacity.
(b) An agreement submitted for certification under this section
may provide that the agreement is contingent on certification by the
commission.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 35.063. HEARING. (a) The commission, on its own motion

or on the request of a party to the agreement or another affected
person, may conduct a hearing on an agreement for which certification
is sought under Section 35.062.
(b) A request for a hearing or a commission decision to hold a
hearing must be made not later than the 90th day after the date the
agreement is submitted to the commission.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 35.064. CERTIFICATION STANDARDS. The commission shall

certify an agreement submitted under Section 35.062 if the agreement:
(1) provides for payments over the contract term that are

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equal to or less than the electric utility's avoided costs, as

established by the commission and in effect at the time the agreement
was signed; and
(2) provides the electric utility the opportunity to
acquire the cogeneration or small-power production installation
before the installation is offered to another purchaser or provides
other sufficient assurance that the electric utility will be provided
with a comparable supply of electricity, if the qualifying facility
ceases to operate the installation.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 35.065. DEADLINES FOR COMMISSION ACTION. (a) Except as

provided by Subsection (b), the commission shall make its
determination regarding whether a certification should be granted
under Section 35.064 not later than the 90th day after the date the
agreement is submitted.
(b) If a hearing is held under Section 35.063, the commission
shall make its determination regarding whether a certification should
be granted not later than the 120th day after the date the agreement
is submitted, except that this deadline is extended by two days for
each day in excess of five days on which the commission conducts a
hearing on the merits of the certification.
(c) If the commission does not make a determination by the date
provided by Subsection (a) or (b), as applicable, the agreement is
considered to meet the requirements of Section 35.064 and the
certification is considered granted.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 35.066. TERM OF CERTIFICATION. A certification of an

agreement granted under this subchapter is effective until the
earlier of:
(1) the expiration date of the agreement; or
(2) the 15th anniversary of the date of the certification.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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SUBCHAPTER E. ELECTRIC ENERGY STORAGE

Sec. 35.151. ELECTRIC ENERGY STORAGE. This subchapter applies
only to the ownership or operation of electric energy storage
equipment or facilities in the ERCOT power region that are intended
to:
(1) provide energy or ancillary services at wholesale,
including electric energy storage equipment or facilities listed on a
power generation company's registration with the commission or, for
an exempt wholesale generator, on the generator's registration with
the Federal Energy Regulatory Commission; or
(2) provide reliable delivery of electric energy to
distribution customers.

Added by Acts 2011, 82nd Leg., R.S., Ch. 1069 (S.B. 943), Sec. 2,
eff. September 1, 2011.
Amended by:
Acts 2021, 87th Leg., R.S., Ch. 562 (S.B. 415), Sec. 1, eff.
September 1, 2021.

Sec. 35.152. GENERATION ASSETS. (a) Electric energy storage

equipment or facilities that are intended to be used to sell energy
or ancillary services at wholesale are generation assets.
(b) The owner or operator of electric energy storage equipment
or facilities that are generation assets under Subsection (a) is a
power generation company and is required to register under Section
39.351(a). The owner or operator of the equipment or facilities is
entitled to:
(1) interconnect the equipment or facilities;
(2) obtain transmission service for the equipment or
facilities; and
(3) use the equipment or facilities to sell electricity or
ancillary services at wholesale in a manner consistent with the
provisions of this title and commission rules applicable to a power
generation company or an exempt wholesale generator.
(c) Notwithstanding Subsection (a), this section does not
affect a determination made by the commission in a final order issued
before December 31, 2010.
(d) Subsection (b) does not require a municipally owned utility
or an electric cooperative that owns or operates electric energy

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storage equipment or facilities described by Subsection (a) to

register as a power generation company under Section 39.351(a).

Added by Acts 2011, 82nd Leg., R.S., Ch. 1069 (S.B. 943), Sec. 2,
eff. September 1, 2011.
Amended by:
Acts 2019, 86th Leg., R.S., Ch. 77 (S.B. 1012), Sec. 1, eff.
September 1, 2019.

Sec. 35.153. CONTRACTS FOR ELECTRIC ENERGY STORAGE FOR

RELIABILITY SERVICES. (a) A transmission and distribution utility,
with prior approval of the commission, may contract with a power
generation company to provide electric energy from an electric energy
storage facility to ensure reliable service to distribution
customers.
(b) The commission may not authorize ownership of an electric
energy storage facility by a transmission and distribution utility.
(c) Before entering into a contract under Subsection (a), the
transmission and distribution utility must issue a request for
proposals for use of an electric energy storage facility to meet the
utility's reliability needs.
(d) A transmission and distribution utility may enter into a
contract under Subsection (a) only if use of an electric energy
storage facility is more cost-effective than construction or
modification of traditional distribution facilities.
(e) A transmission and distribution utility may not enter into
a contract under Subsection (a) that reserves an amount of capacity
exceeding the amount of capacity required to ensure reliable service
to the utility's distribution customers.
(f) A power generation company that owns or operates an
electric energy storage facility subject to a contract under
Subsection (a) may sell electric energy or ancillary services through
use of the facility only to the extent that the company reserves
capacity as required by the contract.
(g) A power generation company that owns or operates an
electric energy storage facility subject to a contract under
Subsection (a) may not discharge the facility to satisfy the
contract's requirements unless directed by the transmission and
distribution utility.

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(h) A contract under Subsection (a) must require a power

generation company that owns or operates an electric energy storage
facility to reimburse a transmission and distribution utility for the
cost of an administrative penalty assessed against the utility for a
violation caused by the facility's failure to meet the requirements
of the agreement.
(i) In establishing the rates of a transmission and
distribution utility, a regulatory authority shall review a contract
between the utility and a power generation company under Subsection
(a). The utility has the burden of proof to establish that the costs
of the contract are reasonable and necessary. The regulatory
authority may authorize a transmission and distribution utility to
include a reasonable return on the payments required under the
contract only if the contract terms satisfy the relevant accounting
standards for a capital lease or finance lease.
(j) The total amount of electric energy storage capacity
reserved by contracts under Subsection (a) may not exceed 100
megawatts. The commission shall by rule establish the maximum amount
of electric energy storage capacity allotted to each transmission and
distribution utility.
(k) The commission shall adopt rules as necessary to implement
this section and establish criteria for approving contracts under
Subsection (a).

Added by Acts 2021, 87th Leg., R.S., Ch. 562 (S.B. 415), Sec. 2, eff.
September 1, 2021.

CHAPTER 36. RATES

SUBCHAPTER A. GENERAL PROVISIONS
Sec. 36.001. AUTHORIZATION TO ESTABLISH AND REGULATE RATES.
(a) The regulatory authority may establish and regulate rates of an
electric utility and may adopt rules for determining:
(1) the classification of customers and services; and
(2) the applicability of rates.
(b) A rule or order of the regulatory authority may not
conflict with a ruling of a federal regulatory body.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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Sec. 36.002. COMPLIANCE WITH TITLE. An electric utility may

not charge or receive a rate for utility service except as provided
by this title.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 36.003. JUST AND REASONABLE RATES. (a) The regulatory

authority shall ensure that each rate an electric utility or two or
more electric utilities jointly make, demand, or receive is just and
reasonable.
(b) A rate may not be unreasonably preferential, prejudicial,
or discriminatory but must be sufficient, equitable, and consistent
in application to each class of consumer.
(c) An electric utility may not:
(1) grant an unreasonable preference or advantage
concerning rates to a person in a classification;
(2) subject a person in a classification to an unreasonable
prejudice or disadvantage concerning rates; or
(3) establish or maintain an unreasonable difference
concerning rates between localities or between classes of service.
(d) In establishing an electric utility's rates, the commission
may treat as a single class two or more municipalities that an
electric utility serves if the commission considers that treatment to
be appropriate.
(e) A charge to an individual customer for retail or wholesale
electric service that is less than the rate approved by the
regulatory authority does not constitute an impermissible difference,
preference, or advantage.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 36.004. EQUALITY OF RATES AND SERVICES. (a) An electric

utility may not directly or indirectly charge, demand, or receive
from a person a greater or lesser compensation for a service provided
or to be provided by the utility than the compensation prescribed by
the applicable tariff filed under Section 32.101.
(b) A person may not knowingly receive or accept a service from
an electric utility for a compensation greater or less than the
compensation prescribed by the tariff.

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(c) Notwithstanding Subsections (a) and (b), an electric

utility may charge an individual customer for wholesale or retail
electric service in accordance with Section 36.007.
(d) This title does not prevent a cooperative corporation from
returning to its members net earnings resulting from its operations
in proportion to the members' purchases from or through the
corporation.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 36.005. RATES FOR AREA NOT IN MUNICIPALITY. Without the

approval of the commission, an electric utility's rates for an area
not in a municipality may not exceed 115 percent of the average of
all rates for similar services for all municipalities served by the
same utility in the same county as that area.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 36.006. BURDEN OF PROOF. In a proceeding involving a

proposed rate change, the electric utility has the burden of proving
that:
(1) the rate change is just and reasonable, if the utility
proposes the change; or
(2) an existing rate is just and reasonable, if the
proposal is to reduce the rate.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 36.007. DISCOUNTED WHOLESALE OR RETAIL RATES. (a) On

application by an electric utility, a regulatory authority may
approve wholesale or retail tariffs or contracts containing charges
that are less than rates approved by the regulatory authority but not
less than the utility's marginal cost. The charges must be in
accordance with the principles of this title and may not be
unreasonably preferential, prejudicial, discriminatory, predatory, or
anticompetitive.
(b) The method for computing the marginal cost of the electric
utility consists of energy and capacity components. The energy

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component includes variable operation and maintenance expense and

marginal fuel or the energy component of purchased power. The
capacity component is based on the annual economic value of
deferring, accelerating, or avoiding the next increment of needed
capacity, without regard to whether the capacity is purchased or
built.
(c) The commission shall ensure that the method for determining
marginal cost is consistently applied among utilities but may
recognize the individual load and resource requirements of the
electric utility.
(d) Notwithstanding any other provision of this title, the
commission shall ensure that the electric utility's allocable costs
of serving customers paying discounted rates under this section are
not borne by the utility's other customers.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 36.008. STATE TRANSMISSION SYSTEM. In establishing rates

for an electric utility, the commission may review the state's
transmission system and make recommendations to the utility on the
need to build new power lines, upgrade power lines, and make other
necessary improvements and additions.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 405, Sec. 23, eff. Sept. 1, 1999.

Sec. 36.009. BILLING DEMAND FOR CERTAIN UTILITY CUSTOMERS.

Notwithstanding any other provision of this code, the commission by
rule shall require a transmission and distribution utility to:
(1) waive the application of demand ratchet provisions for
each nonresidential secondary service customer that has a maximum
load factor equal to or below a factor set by commission rule;
(2) implement procedures to verify annually whether each
nonresidential secondary service customer has a maximum load factor
that qualifies the customer for the waiver described by Subdivision
(1);
(3) specify in the utility's tariff whether the utility's
nonresidential secondary service customers that qualify for the
waiver described by Subdivision (1) are to be billed for distribution

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service charges on the basis of:

(A) kilowatts;
(B) kilowatt-hours; or
(C) kilovolt-amperes; and
(4) modify the utility's tariff in the utility's next base
rate case to implement the waiver described by Subdivision (1) and
make the specification required by Subdivision (3).

Added by Acts 2011, 82nd Leg., R.S., Ch. 150 (H.B. 1064), Sec. 1, eff.
May 28, 2011.

SUBCHAPTER B. COMPUTATION OF RATES

Sec. 36.051. ESTABLISHING OVERALL REVENUES. In establishing an
electric utility's rates, the regulatory authority shall establish
the utility's overall revenues at an amount that will permit the
utility a reasonable opportunity to earn a reasonable return on the
utility's invested capital used and useful in providing service to
the public in excess of the utility's reasonable and necessary
operating expenses.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 36.052. ESTABLISHING REASONABLE RETURN. In establishing a

reasonable return on invested capital, the regulatory authority shall
consider applicable factors, including:
(1) the efforts and achievements of the utility in
conserving resources;
(2) the quality of the utility's services;
(3) the efficiency of the utility's operations; and
(4) the quality of the utility's management.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 405, Sec. 24, eff. Sept. 1, 1999.

Sec. 36.053. COMPONENTS OF INVESTED CAPITAL. (a) Electric

utility rates shall be based on the original cost, less depreciation,
of property used by and useful to the utility in providing service.
(b) The original cost of property shall be determined at the

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time the property is dedicated to public use, whether by the utility

that is the present owner or by a predecessor.
(c) In this section, the term "original cost" means the actual
money cost or the actual money value of consideration paid other than
money.
(d) If the commission issues a certificate of convenience and
necessity or if the commission, acting under the authority formerly
provided by Section 39.203(e), ordered an electric utility or a
transmission and distribution utility to construct or enlarge
transmission or transmission-related facilities to facilitate meeting
the goal for generating capacity from renewable energy technologies
under former Section 39.904(a), the commission shall find that the
facilities are used and useful to the utility in providing service
for purposes of this section and are prudent and includable in the
rate base, regardless of the extent of the utility's actual use of
the facilities.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2005, 79th Leg., 1st C.S., Ch. 1 (S.B. 20), Sec. 1, eff.
September 1, 2005.
Acts 2023, 88th Leg., R.S., Ch. 410 (H.B. 1500), Sec. 10, eff.
September 1, 2023.

Sec. 36.054. CONSTRUCTION WORK IN PROGRESS. (a) Construction

work in progress, at cost as recorded on the electric utility's
books, may be included in the utility's rate base. The inclusion of
construction work in progress is an exceptional form of rate relief
that the regulatory authority may grant only if the utility
demonstrates that inclusion is necessary to the utility's financial
integrity.
(b) Construction work in progress may not be included in the
rate base for a major project under construction to the extent that
the project has been inefficiently or imprudently planned or managed.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 36.055. SEPARATIONS AND ALLOCATIONS. Costs of facilities,

revenues, expenses, taxes, and reserves shall be separated or

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allocated as prescribed by the regulatory authority.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 36.056. DEPRECIATION, AMORTIZATION, AND DEPLETION. (a)

The commission shall establish proper and adequate rates and methods
of depreciation, amortization, or depletion for each class of
property of an electric or municipally owned utility.
(b) The rates and methods established under this section and
the depreciation account required by Section 32.102 shall be used
uniformly and consistently throughout rate-setting and appeal
proceedings.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 36.057. NET INCOME; DETERMINATION OF REVENUES AND

EXPENSES. (a) An electric utility's net income is the total
revenues of the utility less all reasonable and necessary expenses as
determined by the regulatory authority.
(b) The regulatory authority shall determine revenues and
expenses in a manner consistent with this subchapter.
(c) The regulatory authority may adopt reasonable rules with
respect to whether an expense is allowed for ratemaking purposes.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 36.058. CONSIDERATION OF PAYMENT TO AFFILIATE. (a)

Except as provided by Subsection (b), the regulatory authority may
not allow as capital cost or as expense a payment to an affiliate
for:
(1) the cost of a service, property, right, or other item;
or
(2) interest expense.
(b) The regulatory authority may allow a payment described by
Subsection (a) only to the extent that the regulatory authority finds
the payment is reasonable and necessary for each item or class of
items as determined by the commission.
(c) A finding under Subsection (b) must include:

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(1) a specific finding of the reasonableness and necessity

of each item or class of items allowed; and
(2) a finding that the price to the electric utility is not
higher than the prices charged by the supplying affiliate for the
same item or class of items to:
(A) its other affiliates or divisions; or
(B) a nonaffiliated person within the same market area
or having the same market conditions.
(d) In making a finding regarding an affiliate transaction, the
regulatory authority shall:
(1) determine the extent to which the conditions and
circumstances of that transaction are reasonably comparable relative
to quantity, terms, date of contract, and place of delivery; and
(2) allow for appropriate differences based on that
determination.
(e) This section does not require a finding to be made before
payments made by an electric utility to an affiliate are included in
the utility's charges to consumers if there is a mechanism for making
the charges subject to refund pending the making of the finding.
(f) If the regulatory authority finds that an affiliate expense
for the test period is unreasonable, the regulatory authority shall:
(1) determine the reasonable level of the expense; and
(2) include that expense in determining the electric
utility's cost of service.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 405, Sec. 25, eff. Sept. 1, 1999.
Amended by:
Acts 2005, 79th Leg., Ch. 413 (S.B. 1668), Sec. 1, eff. June 17,
2005.

Sec. 36.059. TREATMENT OF CERTAIN TAX BENEFITS. (a) In

determining the allocation of tax savings derived from liberalized
depreciation and amortization, the investment tax credit, and the
application of similar methods, the regulatory authority shall:
(1) balance equitably the interests of present and future
customers; and
(2) apportion accordingly the benefits between consumers
and the electric or municipally owned utility.

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(b) If an electric utility or a municipally owned utility

retains a portion of the investment tax credit, that portion shall be
deducted from the original cost of the facilities or other addition
to the rate base to which the credit applied to the extent allowed by
the Internal Revenue Code.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 36.060. CONSOLIDATED INCOME TAX RETURNS. (a) If an

expense is allowed to be included in utility rates or an investment
is included in the utility rate base, the related income tax benefit
must be included in the computation of income tax expense to reduce
the rates. If an expense is not allowed to be included in utility
rates or an investment is not included in the utility rate base, the
related income tax benefit may not be included in the computation of
income tax expense to reduce the rates. The income tax expense shall
be computed using the statutory income tax rates.
(b) The amount of income tax that a consolidated group of which
an electric utility is a member saves, because the consolidated
return eliminates the intercompany profit on purchases by the utility
from an affiliate, shall be applied to reduce the cost of the
property or service purchased from the affiliate.
(c) The investment tax credit allowed against federal income
taxes, to the extent retained by the electric utility, shall be
applied as a reduction in the rate-based contribution of the assets
to which the credit applies, to the extent and at the rate allowed by
the Internal Revenue Code.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2013, 83rd Leg., R.S., Ch. 787 (S.B. 1364), Sec. 1, eff.
September 1, 2013.

Sec. 36.061. ALLOWANCE OF CERTAIN EXPENSES. (a) The

regulatory authority may not allow as a cost or expense for
ratemaking purposes:
(1) an expenditure for legislative advocacy; or
(2) an expenditure described by Section 32.104 that the
regulatory authority determines to be not in the public interest.

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(b) The regulatory authority may allow as a cost or expense:

(1) reasonable charitable or civic contributions not to
exceed the amount approved by the regulatory authority; and
(2) reasonable costs of participating in a proceeding under
this title not to exceed the amount approved by the regulatory
authority.
(c) An electric utility located in a portion of this state not
subject to retail competition may establish a bill payment assistance
program for a customer who is a military veteran who a medical doctor
certifies has a significantly decreased ability to regulate the
individual's body temperature because of severe burns received in
combat. A regulatory authority shall allow as a cost or expense a
cost or expense of the bill payment assistance program. The electric
utility is entitled to:
(1) fully recover all costs and expenses related to the
bill payment assistance program;
(2) defer each cost or expense related to the bill payment
assistance program not explicitly included in base rates; and
(3) apply carrying charges at the utility's weighted
average cost of capital to the extent related to the bill payment
assistance program.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2013, 83rd Leg., R.S., Ch. 597 (S.B. 981), Sec. 1, eff. June
14, 2013.

Sec. 36.062. CONSIDERATION OF CERTAIN EXPENSES. The regulatory

authority may not consider for ratemaking purposes:
(1) an expenditure for legislative advocacy, made directly
or indirectly, including legislative advocacy expenses included in
trade association dues;
(2) a payment made to cover costs of an accident, equipment
failure, or negligence at a utility facility owned by a person or
governmental entity not selling power in this state, other than a
payment made under an insurance or risk-sharing arrangement executed
before the date of loss;
(3) an expenditure for costs of processing a refund or
credit under Section 36.110; or

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(4) any other expenditure, including an executive salary,

advertising expense, legal expense, or civil penalty or fine, the
regulatory authority finds to be unreasonable, unnecessary, or not in
the public interest.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 36.063. CONSIDERATION OF PROFIT OR LOSS FROM SALE OR LEASE

OF MERCHANDISE. In establishing an electric or municipally owned
utility's rates, the regulatory authority may not consider any profit
or loss that results from the sale or lease of merchandise, including
appliances, fixtures, or equipment, to the extent that merchandise is
not integral to providing utility service.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 36.064. SELF-INSURANCE. (a) An electric utility may

self-insure all or part of the utility's potential liability or
catastrophic property loss, including windstorm, fire, and explosion
losses, that could not have been reasonably anticipated and included
under operating and maintenance expenses.
(b) The commission shall approve a self-insurance plan under
this section if the commission finds that:
(1) the coverage is in the public interest;
(2) the plan, considering all costs, is a lower cost
alternative to purchasing commercial insurance; and
(3) ratepayers will receive the benefits of the savings.
(c) In computing an electric utility's reasonable and necessary
expenses under this subchapter, the regulatory authority, to the
extent the regulatory authority finds is in the public interest,
shall allow as a necessary expense the money credited to a reserve
account for self-insurance. The regulatory authority shall determine
reasonableness under this subsection:
(1) from information provided at the time the self-
insurance plan and reserve account are established; and
(2) on the filing of a rate case by an electric utility
that has a reserve account.
(d) After a reserve account for self-insurance is established,
the regulatory authority shall:

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(1) determine whether the reserve account has a surplus or

shortage under Subsection (e); and
(2) subtract any surplus from or add any shortage to the
utility's rate base.
(e) A surplus in the reserve account exists if the charges
against the account are less than the money credited to the account.
A shortage in the reserve account exists if the charges against the
account are greater than the money credited to the account.
(f) The allowance for self-insurance under this title for
ratemaking purposes is not applicable to nuclear plant investment.
(g) The commission shall adopt rules governing self-insurance
under this section.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 36.065. PENSION AND OTHER POSTEMPLOYMENT BENEFITS. (a)

The regulatory authority shall include in the rates of an electric
utility expenses for pension and other postemployment benefits, as
determined by actuarial or other similar studies in accordance with
generally accepted accounting principles, in an amount the regulatory
authority finds reasonable. Expenses for pension and other
postemployment benefits include, in an amount found reasonable by the
regulatory authority, the benefits attributable to the service of
employees who were employed by the predecessor integrated electric
utility of an electric utility before the utility's unbundling under
Chapter 39 irrespective of the business activity performed by the
employee or the affiliate to which the employee was transferred on or
after the unbundling.
(b) An electric utility may establish one or more reserve
accounts for expenses for pension and other postemployment benefits.
An electric utility shall periodically record in the reserve account
any difference between:
(1) the annual amount of pension and other postemployment
benefits approved as an expense in the electric utility's last
general rate proceeding or, if that amount cannot be determined from
the regulatory authority's order, the amount recorded for pension and
other postemployment benefits under generally accepted accounting
principles during the first year that rates from the electric
utility's last general rate proceeding are in effect; and

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(2) the annual amount of pension and other postemployment

benefits as determined by actuarial or other similar studies that are
chargeable to the electric utility's expense.
(c) A surplus in the reserve account exists if the amount of
pension and other postemployment benefits under Subsection (b)(1) is
greater than the amount determined under Subsection (b)(2). A
shortage in the reserve account exists if the amount of pension and
other postemployment benefits under Subsection (b)(1) is less than
the amount determined under Subsection (b)(2).
(d) If a reserve account for pension and other postemployment
benefits is established, the regulatory authority at a subsequent
general rate proceeding shall:
(1) review the amounts recorded to the reserve account to
determine whether the amounts are reasonable expenses;
(2) determine whether the reserve account has a surplus or
shortage under Subsection (c); and
(3) subtract any surplus from or add any shortage to the
electric utility's rate base with the surplus or shortage amortized
over a reasonable time.

Added by Acts 2005, 79th Leg., Ch. 385 (S.B. 1447), Sec. 1, eff. June
17, 2005.
Amended by:
Acts 2017, 85th Leg., R.S., Ch. 51 (S.B. 1002), Sec. 1, eff. May
22, 2017.

Sec. 36.066. COSTS RELATED TO REPORTING ON SAFETY PROCESSES AND

INSPECTIONS FOR CERTAIN UTILITIES. (a) Costs incurred by an
electric utility to comply with Section 38.102 shall be recorded as a
regulatory asset for timely recovery in rates established by the
commission.
(b) The commission may adopt rules relating to the recording of
regulatory assets under this section.

Added by Acts 2019, 86th Leg., R.S., Ch. 1320 (H.B. 4150), Sec. 3,
eff. September 1, 2019.

Sec. 36.067. CONSIDERATION OF COMPENSATION AND BENEFIT

EXPENSES. (a) In this section, "employee compensation and benefits"

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includes base salaries, wages, incentive compensation, and benefits.

The term does not include:
(1) pension or other postemployment benefits; or
(2) incentive compensation for an officer of an electric
utility related to attaining:
(A) financial metrics; or
(B) metrics adverse to customers' interests as
determined by the commission.
(b) When establishing an electric utility's rates, the
regulatory authority shall presume that employee compensation and
benefits expenses are reasonable and necessary if the expenses are
consistent with market compensation studies issued not earlier than
three years before the initiation of the proceeding to establish the
rates.

Added by Acts 2023, 88th Leg., R.S., Ch. 3 (S.B. 1016), Sec. 1, eff.
May 5, 2023.

SUBCHAPTER C. GENERAL PROCEDURES FOR RATE CHANGES PROPOSED BY UTILITY

Sec. 36.101. DEFINITION. In this subchapter, "major change"
means an increase in rates that would increase the aggregate revenues
of the applicant more than the greater of $100,000 or 2-1/2 percent.
The term does not include an increase in rates that the regulatory
authority allows to go into effect or the electric utility makes
under an order of the regulatory authority after hearings held with
public notice.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 36.102. STATEMENT OF INTENT TO CHANGE RATES. (a) Except

as provided by Section 33.024, an electric utility may not change its
rates unless the utility files a statement of its intent with the
regulatory authority that has original jurisdiction over those rates
at least 35 days before the effective date of the proposed change.
(b) The electric utility shall also mail or deliver a copy of
the statement of intent to the appropriate officer of each affected
municipality.
(c) The statement of intent must include:
(1) proposed revisions of tariffs; and

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(2)
a detailed statement of:
(A) each proposed change;
(B) the effect the proposed change is expected to have
on the revenues of the utility;
(C) each class and number of utility consumers
affected; and
(D) any other information required by the regulatory
authority's rules.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 36.103. NOTICE OF INTENT TO CHANGE RATES. (a) The

electric utility shall:
(1) publish, in conspicuous form and place, notice to the
public of the proposed change once each week for four successive
weeks before the effective date of the proposed change in a newspaper
having general circulation in each county containing territory
affected by the proposed change; and
(2) mail notice of the proposed change to any other
affected person as required by the regulatory authority's rules.
(b) The regulatory authority may waive the publication of
notice requirement prescribed by Subsection (a) in a proceeding that
involves only a rate reduction for each affected ratepayer. The
applicant shall give notice of the proposed rate change by mail to
each affected utility customer.
(c) The regulatory authority by rule shall define other
proceedings for which the publication of notice requirement
prescribed by Subsection (a) may be waived on a showing of good
cause. A waiver may not be granted in a proceeding involving a rate
increase to any class or category of ratepayer.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 36.104. EARLY EFFECTIVE DATE OF RATE CHANGE. (a) For

good cause shown, the regulatory authority may allow a rate change,
other than a major change, to take effect:
(1) before the end of the 35-day period prescribed by
Section 36.102; and
(2) under conditions the regulatory authority prescribes,

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subject to suspension as provided by this subchapter.

(b) The electric utility shall immediately revise its tariffs
to include the change.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 36.105. DETERMINATION OF PROPRIETY OF RATE CHANGE;

HEARING. (a) If a tariff changing rates is filed with a regulatory
authority, the regulatory authority shall, on complaint by an
affected person, or may, on its own motion, not later than the 30th
day after the effective date of the change, enter on a hearing to
determine the propriety of the change.
(b) The regulatory authority shall hold a hearing in every case
in which the change constitutes a major change. The regulatory
authority may, however, use an informal proceeding if the regulatory
authority does not receive a complaint before the 46th day after the
date notice of the change is filed.
(c) The regulatory authority shall give reasonable notice of
the hearing, including notice to the governing body of each affected
municipality and county. The electric utility is not required to
provide a formal answer or file any other formal pleading in response
to the notice, and the absence of an answer does not affect an order
for a hearing.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 36.106. REGIONAL HEARING. The commission shall hold a

regional hearing at an appropriate location in a case in which the
commission determines it is in the public interest to hear testimony
at a regional hearing for inclusion in the record.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 36.107. PREFERENCE TO HEARING. The regulatory authority

shall:
(1) give preference to a hearing under this subchapter and
to deciding questions arising under this subchapter and Subchapter E
over any other question pending before it; and

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(2) decide the questions as quickly as possible.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 36.108. RATE SUSPENSION; DEADLINE. (a) Pending the

hearing and a decision:
(1) the local regulatory authority, after delivering to the
electric utility a written statement of the regulatory authority's
reasons, may suspend the rate change for not longer than 90 days
after the date the rate change would otherwise be effective; and
(2) the commission may suspend the rate change for not
longer than 150 days after the date the rate change would otherwise
be effective.
(b) The 150-day period prescribed by Subsection (a)(2) shall be
extended two days for each day the actual hearing on the merits of
the case exceeds 15 days.
(c) If the regulatory authority does not make a final
determination concerning a rate change before expiration of the
applicable suspension period, the regulatory authority is considered
to have approved the change. This approval is subject to the
authority of the regulatory authority thereafter to continue a
hearing in progress.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 36.109. TEMPORARY RATES. (a) The regulatory authority

may establish temporary rates to be in effect during the applicable
suspension period under Section 36.108.
(b) If the regulatory authority does not establish temporary
rates, the rates in effect when the suspended tariff was filed
continue in effect during the suspension period.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 36.110. BONDED RATES. (a) An electric utility may put a

changed rate into effect throughout the area in which the utility
sought to change its rates, including an area over which the
commission is exercising appellate or original jurisdiction, by

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filing a bond with the commission if:

(1) the 150-day suspension period has been extended under
Section 36.108(b); and
(2) the commission fails to make a final determination
before the 151st day after the date the rate change would otherwise
be effective.
(b) The bonded rate may not exceed the proposed rate.
(c) The bond must be:
(1) payable to the commission in an amount, in a form, and
with a surety approved by the commission; and
(2) conditioned on refund.
(d) The electric utility shall refund or credit against future
bills:
(1) money collected under the bonded rates in excess of the
rate finally ordered; and
(2) interest on that money, at the current interest rate as
determined by the commission.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 36.111. ESTABLISHMENT OF FINAL RATES. (a) If, after

hearing, the regulatory authority finds the rates are unreasonable or
in violation of law, the regulatory authority shall:
(1) enter an order establishing the rates the electric
utility shall charge or apply for the service in question; and
(2) serve a copy of the order on the electric utility.
(b) The rates established in the order shall be observed
thereafter until changed as provided by this title.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

For expiration of this section, see Subsection (g).

Sec. 36.112. COST RECOVERY AND RATE ADJUSTMENT STANDARDS AND
PROCEDURES FOR CERTAIN NON-ERCOT UTILITIES. (a) This section
applies only to an electric utility that operates solely outside of
ERCOT.
(b) In establishing the base rates of the electric utility
under this subchapter or Subchapter D, the regulatory authority shall

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determine the utility's revenue requirement based on, at the election

of the utility:
(1) information submitted for a test year; or
(2) information submitted for a test year, updated to
include information that reflects the most current actual or
estimated information regarding increases and decreases in the
utility's cost of service, including expenses, capital investment,
cost of capital, and sales.
(c) An electric utility that elects to provide updated
information under Subsection (b)(2) must provide the information for
a period ending not later than the 30th day before the date the
applicable rate proceeding is filed.
(d) An electric utility that includes estimated information in
the initial filing of a proceeding shall supplement the filing with
actual information not later than the 45th day after the date the
initial filing was made. The regulatory authority shall extend the
deadline for concluding the rate proceeding for a period of time
equal to the period between the date the initial filing of the
proceeding was made and the date of the supplemental filing, except
that the extension period may not exceed 45 days.
(e) An electric utility that makes an election under Subsection
(b) is not precluded from proposing known and measurable adjustments
to the utility's historical rate information as permitted by this
title and regulatory authority rules.
(f) Without limiting the availability of known and measurable
adjustments described by Subsection (e), the regulatory authority
shall allow an affected electric utility to make a known and
measurable adjustment to include in the utility's rates the prudent
capital investment, a reasonable return on such capital investment,
depreciation expense, reasonable and necessary operating expenses,
and all attendant impacts, including any offsetting revenue, as
determined by the regulatory authority, associated with a newly
constructed or acquired natural gas-fired generation facility. The
regulatory authority is required to allow the adjustment only if the
facility is in service before the effective date of new rates. The
adjustment may be made regardless of whether the investment is less
than 10 percent of the utility's rate base before the date of the
adjustment.
(g) This section expires September 1, 2031.

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Added by Acts 2015, 84th Leg., R.S., Ch. 733 (H.B. 1535), Sec. 1, eff.
June 17, 2015.
Amended by:
Acts 2019, 86th Leg., R.S., Ch. 1067 (H.B. 1397), Sec. 1, eff.
June 14, 2019.

SUBCHAPTER D. RATE CHANGES PROPOSED BY REGULATORY AUTHORITY

Sec. 36.151. UNREASONABLE OR VIOLATIVE EXISTING RATES. (a) If
the regulatory authority, on its own motion or on complaint by an
affected person, after reasonable notice and hearing, finds that the
existing rates of an electric utility for a service are unreasonable
or in violation of law, the regulatory authority shall:
(1) enter an order establishing the just and reasonable
rates to be observed thereafter, including maximum or minimum rates;
and
(2) serve a copy of the order on the electric utility.
(b) The rates established under Subsection (a) constitute the
legal rates of the electric utility until changed as provided by this
title.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 36.152. INVESTIGATING COSTS OF OBTAINING SERVICE FROM

ANOTHER SOURCE. If an electric utility does not produce or generate
the service that it distributes, transmits, or furnishes to the
public for compensation but obtains the service from another source,
the regulatory authority may investigate the cost of that production
or generation in an investigation of the reasonableness of the
electric utility's rates.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 36.153. RATE-FILING PACKAGE. (a) An electric utility

shall file a rate-filing package with the regulatory authority not
later than the 120th day after the date the authority notifies the
utility that the authority will proceed with an inquiry under Section
36.151.
(b) The regulatory authority may grant an extension of the 120-

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day period prescribed by Subsection (a) or waive the rate-filing

package requirement on agreement of the parties.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 36.154. DEADLINE. (a) The regulatory authority shall

make a final determination not later than the 185th day after the
date the electric utility files the rate-filing package required by
Section 36.153.
(b) The deadline prescribed by Subsection (a) is extended two
days for each day the actual hearing on the merits of the case
exceeds 15 days.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 36.155. INTERIM ORDER ESTABLISHING TEMPORARY RATES. (a)

At any time after an initial complaint is filed under Section 36.151,
the regulatory authority may issue an interim order establishing
temporary rates for the electric utility to be in effect until a
final determination is made.
(b) On issuance of a final order, the regulatory authority:
(1) may require the electric utility to refund to customers
or to credit against future bills:
(A) money collected under the temporary rates in excess
of the rate finally ordered; and
(B) interest on that money, at the current interest
rate as determined by the commission; or
(2) shall authorize the electric utility to surcharge bills
to recover:
(A) the amount by which the money collected under the
temporary rates is less than the money that would have been collected
under the rate finally ordered; and
(B) interest on that amount, at the current interest
rate as determined by the commission.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 36.156. AUTOMATIC TEMPORARY RATES. (a) The rates charged

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by the electric utility on the 185th day after the date the utility
files the rate-filing package required by Section 36.153
automatically become temporary rates if:
(1) the 185-day period has been extended under Section
36.154(b); and
(2) the regulatory authority has not issued a final order
or established temporary rates for the electric utility on or before
the 185th day.
(b) On issuance of a final order, the regulatory authority:
(1) shall require the electric utility to refund to
customers or to credit against future bills:
(A) money collected under the temporary rates in excess
of the rate finally ordered; and
(B) interest on that money, at the current interest
rate as determined by the commission; or
(2) shall authorize the electric utility to surcharge bills
to recover:
(A) the amount by which the money collected under the
temporary rates is less than the money that would have been collected
under the rate finally ordered; and
(B) interest on that amount, at the current interest
rate as determined by the commission.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 36.157. RATE REVIEW SCHEDULE. (a) This section applies

only to an electric utility, other than a river authority, that
operates solely inside ERCOT.
(b) Notwithstanding any other provision of this title, not
later than June 1, 2018, the commission by rule shall establish a
schedule that requires an electric utility to make periodic filings
with the commission to modify or review base rates charged by the
electric utility. The schedule may be established on the basis of:
(1) the period since the commission entered the
commission's final order in the electric utility's most recent base
rate proceeding;
(2) whether the electric utility has earned materially more
than the utility's authorized rate of return on equity as
demonstrated by earnings monitoring reports; or

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(3) other criteria that the commission determines is in the

public interest.
(c) The commission shall extend the date for the proceeding
required by Subsection (b) by one year on a year-to-year basis if,
180 days before the date the proceeding is required, the electric
utility's most recent earnings monitoring report shows the electric
utility is earning, on a weather-normalized basis, less than 50 basis
points above:
(1) for a transmission and distribution utility, the
average of the most recent commission-approved rate of return on
equity for each transmission and distribution utility with 175,000 or
more metered customers; and
(2) for a transmission-only utility, the average of the
most recent commission-approved rate of return on equity for each
transmission-only utility.
(d) The commission may extend the date for the proceeding
required by Subsection (b) for good cause shown or because of
resource constraints of the commission.
(e) This section does not limit the ability of a regulatory
authority to initiate a base rate proceeding at any time under this
title.

Added by Acts 2017, 85th Leg., R.S., Ch. 200 (S.B. 735), Sec. 1, eff.
May 27, 2017.

SUBCHAPTER E. COST RECOVERY AND RATE ADJUSTMENT

Sec. 36.201. AUTOMATIC ADJUSTMENT FOR CHANGES IN COSTS. Except
as permitted by Section 36.204, the commission may not establish a
rate or tariff that authorizes an electric utility to automatically
adjust and pass through to the utility's customers a change in the
utility's fuel or other costs.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 405, Sec. 26, eff. Sept. 1, 1999.

Sec. 36.202. ADJUSTMENT FOR CHANGE IN TAX LIABILITY. (a) The

commission, on its own motion or on the petition of an electric
utility, shall provide for the adjustment of the utility's billing to
reflect an increase or decrease in the utility's tax liability to

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this state if the increase or decrease:

(1) results from Chapter 5, Acts of the 72nd Legislature,
1st Called Session, 1991; and
(2) is attributable to an activity subject to the
commission's jurisdiction.
(b) The commission shall apportion pro rata to each type and
class of service provided by the utility any billing adjustment under
this section. The adjustment:
(1) shall be made effective at the same time as the
increase or decrease of tax liability described by Subsection (a)(1)
or as soon after that increase or decrease as is reasonably
practical; and
(2) remains effective only until the commission alters the
adjustment as provided by this section or enters an order for the
utility under Subchapter C or D.
(c) Each year after an original adjustment, the commission
shall:
(1) review the utility's increase or decrease of tax
liability described by Subsection (a)(1); and
(2) alter the adjustment as necessary to reflect the
increase or decrease.
(d) A proceeding under this section is not a rate case under
Subchapter C.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 36.203. FUEL AND PURCHASED POWER COST RECOVERY; ADJUSTMENT

OF FUEL FACTOR. (a) Section 36.201 does not prohibit the commission
from reviewing and providing for adjustments of an electric utility's
fuel factor.
(b) The commission by rule shall implement procedures that
provide for the timely adjustment of an electric utility's fuel
factor. The rules must require that the findings required by Section
36.058 regarding fuel transactions with affiliated interests be made
in a fuel reconciliation proceeding or in a rate case filed under
Subchapter C or D. The rules must ensure that:
(1) the utility collects as contemporaneously as reasonably
possible the electric fuel and purchased power costs that the utility
incurs and that the commission determines are eligible;

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(2) the total of the utility's eligible electric fuel and

purchased power costs, including any under-collected or over-
collected amounts to be recovered through an interim fuel adjustment,
is allocated among customer classes based on actual historical
calendar month usage;
(3) any material balance of amounts under-collected or
over-collected for eligible electric fuel and purchased power costs
is collected from or refunded to customers through an interim fuel
adjustment:
(A) not later than the 90th day after the date the
balance is accrued; or
(B) if the adjustment would result in a total bill
increase of 10 percent or more compared to the total bill in the
month before implementation, not later than a date ordered by the
commission which must be after the 90th day after the date the
balance is accrued; and
(4) an affected party will receive notice and have the
opportunity to request a hearing before the commission.
(c) Notwithstanding Subsection (b)(3), on a finding that an
electric utility has an under-collected balance that is the result of
extraordinary electric fuel and purchased power costs that are
unlikely to continue, the commission may approve an interim fuel
adjustment that would defer recovery to take place over a period
longer than 90 days.
(d) The commission is not required to hold a hearing on the
adjustment of an electric utility's fuel factor under this section.
If the commission holds a hearing, the commission may consider at the
hearing any evidence that is appropriate and in the public interest.
(e) A customer of the electric utility, a municipality with
original jurisdiction over the utility, or the office may protest a
fuel factor or interim fuel adjustment proposed under this section.
The prudence of costs may not be considered in a fuel factor or
interim fuel adjustment proceeding and may only be considered in a
fuel reconciliation proceeding under Subsection (h) or another
appropriate proceeding.
(f) The sole issue that may be considered on a protest of a
fuel factor under Subsection (e) is whether the factor reasonably
reflects costs the electric utility will incur so that the utility
will not substantially under-collect or over-collect the utility's
reasonably stated fuel and purchased power costs on an ongoing basis.

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The commission may adjust the utility's fuel factor based on its
determination on that issue.
(g) The commission shall hold a hearing on a protest of an
interim fuel adjustment under Subsection (e) if the adjustment would
result in a total bill increase of 10 percent or more as described by
Subsection (b)(3) or if the adjustment results from extraordinary
electric fuel and purchased power costs as described by Subsection
(c). In response to a protest of an interim fuel adjustment, if the
commission finds that the electric utility is in a state of material
under-collection or over-collection of the utility's reasonably
stated eligible fuel and purchased power costs and is projected to
remain in that state on an ongoing basis, the commission shall order
the utility to establish or modify an interim fuel adjustment to
address the under-collection or over-collection in a manner
consistent with this section.
(h) An electric utility shall apply to reconcile the utility's
electric fuel and purchased power costs at least once every two
years. The application must be made not later than the 180th day
after the last day of the period to be reconciled. The commission
may by rule establish the calendar year timing of the reconciliation
period for each electric utility subject to this section to
facilitate efficient work by the commission. To the extent a
reconciliation results in a change to the electric utility's under-
collected or over-collected fuel balance, that change may be
incorporated into an interim fuel adjustment as directed by the
commission.
(i) A proceeding under this section is not a rate case under
Subchapter C.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2023, 88th Leg., R.S., Ch. 233 (H.B. 2073), Sec. 1, eff.
September 1, 2023.

Sec. 36.204. COST RECOVERY AND INCENTIVES. In establishing

rates for an electric utility, the commission may:
(1) allow timely recovery of the reasonable costs of
conservation, load management, and purchased power, notwithstanding
Section 36.201; and

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(2) authorize additional incentives for conservation, load

management, purchased power, and renewable resources.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 405, Sec. 27, eff. Sept. 1, 1999.

Sec. 36.205. PURCHASED POWER COST RECOVERY. (a) This section

applies only to an increase or decrease in the cost of purchased
electricity that has been:
(1) accepted by a federal regulatory authority; or
(2) approved after a hearing by the commission.
(b) The commission may use any appropriate method to provide
for the adjustment of the cost of purchased electricity on terms
determined by the commission.
(c) Purchased electricity costs may be recovered:
(1) concurrently with the effective date of the changed
costs to the purchasing electric utility; or
(2) as soon after the effective date as reasonably
practical.
(d) The commission may provide a mechanism to allow an electric
utility that has a noncontiguous geographical service area and that
purchases power for resale for that noncontiguous service area from
electric utilities that are not members of the Electric Reliability
Council of Texas to recover purchased power costs for the area in a
manner that reflects the purchased power cost for that specific
geographical noncontiguous area. The commission may not require an
electric cooperative corporation to use the mechanism provided under
this section unless the electric cooperative corporation requests its
use.
(e) Notwithstanding Subsection (a), an electric utility may
apply to the commission for review and approval of an agreement
between the electric utility and another person for the purchase of
power by the electric utility if approval by the commission is a pre-
condition to the effectiveness of the electric utility's right or
obligation to purchase power under the agreement. This subsection
applies only to an agreement with a term of three years or more. The
commission by rule shall implement this subsection consistent with
the standards and procedures in the commission's rules governing
contested cases on certificates of convenience and necessity for

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generating facilities adopted under Sections 37.056 and 37.058. This

subsection expires September 1, 2033.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2023, 88th Leg., R.S., Ch. 1157 (S.B. 1094), Sec. 1, eff.
September 1, 2023.

Sec. 36.206. MARK-UPS. (a) A cost recovery factor established

for the recovery of purchased power costs may include:
(1) the cost the electric utility incurs in purchasing
capacity and energy;
(2) a mark-up added to the cost or another mechanism the
commission determines will reasonably compensate the utility for any
financial risk associated with purchased power obligations; and
(3) the value added by the utility in making the purchased
power available to customers.
(b) The mark-ups and cost recovery factors, if allowed, may be
those necessary to encourage the electric utility to include
economical purchased power as part of the utility's energy and
capacity resource supply plan.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 36.207. USE OF MARK-UPS. Any mark-ups approved under

Section 36.206 are an exceptional form of rate relief that the
electric utility may recover from ratepayers only on a finding by the
commission that the relief is necessary to maintain the utility's
financial integrity.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 405, Sec. 28, eff. Sept. 1, 1999.

Sec. 36.208. PAYMENT TO QUALIFYING FACILITY. In establishing

an electric utility's rates, the regulatory authority shall:
(1) consider a payment made to a qualifying facility under
an agreement certified under Subchapter C, Chapter 35, to be a
reasonable and necessary operating expense of the electric utility

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during the period for which the certification is effective; and

(2) allow full, concurrent, and monthly recovery of the
amount of the payment.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 36.209. RECOVERY BY CERTAIN NON-ERCOT UTILITIES OF CERTAIN

TRANSMISSION COSTS. (a) This section applies only to an electric
utility that operates solely outside of ERCOT in areas of this state
included in the Southeastern Electric Reliability Council, the
Southwest Power Pool, or the Western Electricity Coordinating Council
and that owns or operates transmission facilities.
(b) The commission, after notice and hearing, may allow an
electric utility to recover on an annual basis its reasonable and
necessary expenditures for transmission infrastructure improvement
costs and changes in wholesale transmission charges to the electric
utility under a tariff approved by a federal regulatory authority to
the extent that the costs or charges have not otherwise been
recovered. The commission may allow the electric utility to recover
only the costs allocable to retail customers in the state and may not
allow the electric utility to over-recover costs.

Added by Acts 2005, 79th Leg., Ch. 1024 (H.B. 989), Sec. 1, eff. June
18, 2005.
Amended by:
Acts 2009, 81st Leg., R.S., Ch. 1226 (S.B. 1492), Sec. 1, eff.
June 19, 2009.

Sec. 36.210. PERIODIC RATE ADJUSTMENTS. (a) The commission,

on the petition of an electric utility, may approve a tariff or rate
schedule in which a nonfuel rate may be periodically adjusted upward
or downward, based on changes in the parts of the utility's invested
capital, as described by Section 36.053, that are categorized or
functionalized as distribution plant, distribution-related intangible
plant, and distribution-related communication equipment and networks
in accordance with commission rules adopted after consideration of
the uniform system of accounts prescribed by the Federal Energy
Regulatory Commission. A periodic rate adjustment must:
(1) be approved or denied in accordance with a procedure

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that allows for participation by the office and affected parties;

(2) take into account changes in the number of an electric
utility's customers and the effects, on a weather-normalized basis,
that energy consumption and energy demand have on the amount of
revenue recovered through the electric utility's base rates;
(3) be consistent with the manner in which costs for
invested capital described by this subsection were allocated to each
rate class, as approved by the commission, in an electric utility's
most recent base rate statement of intent proceeding with changes to
residential and commercial class rates reflected in volumetric
charges to the extent that residential and commercial class rates are
collected in that manner based on the electric utility's most recent
base rate statement of intent proceeding;
(4) not diminish the ability of the commission or a
regulatory authority, on its own motion or on complaint by an
affected person as provided by Subchapter D, after reasonable notice
and hearing, to change the existing rates of an electric utility for
a service after finding that the rates are unreasonable or in
violation of law;
(5) be applied by an electric utility on a system-wide
basis; and
(6) be supported by the sworn statement of an appropriate
employee of the electric utility that affirms that:
(A) the filing is in compliance with the provisions of
the tariff or rate schedule; and
(B) the filing is true and correct to the best of the
employee's knowledge, information, and belief.
(b) An electric utility in the ERCOT power region, or an
unbundled electric utility outside the ERCOT power region in whose
service area retail competition is available, that requests a
periodic rate adjustment under this section shall:
(1) except as provided by Subsection (f)(3) and to the
extent possible, implement simultaneously all nonfuel rates to be
adjusted in a 12-month period that are charged by the utility to
retail electric providers; and
(2) provide notice to retail electric providers of the
approved rates not later than the 45th day before the date the rates
take effect.
(c) A periodic rate adjustment approved under this section may
not be used to adjust the portion of a nonfuel rate relating to the

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generation of electricity.
(d) An electric utility may adjust the utility's rates under
this section not more than twice per year.
(d-1) Repealed by Acts 2023, 88th Leg., R.S., Ch. 1154 (S.B.
1015), Sec. 2, eff. June 18, 2023.
(e) A periodic rate adjustment approved under this section may
not include indirect corporate costs or capitalized operations and
maintenance expenses.
(f) Nothing in this section is intended to:
(1) conflict with a provision contained in a financing
order issued under Subchapter I of this chapter or Subchapter G or J,
Chapter 39;
(2) affect the limitation on the commission's jurisdiction
under Section 32.002;
(3) include in a periodic rate adjustment authorized by
this section costs adjusted under a transmission cost-of-service
adjustment approved under Section 35.004(d);
(4) limit the jurisdiction of a municipality over the
rates, operations, and services of an electric utility as provided by
Section 33.001;
(5) limit the ability of a municipality to obtain a
reimbursement under Section 33.023 for the reasonable cost of
services of a person engaged in an activity described by that
section; or
(6) prevent the commission from:
(A) reviewing the investment costs included in a
periodic rate adjustment or in the following comprehensive base rate
proceeding to determine whether the costs were prudent, reasonable,
and necessary; or
(B) refunding to customers any amount improperly
recovered through the periodic rate adjustments, with appropriate
carrying costs.
(g) The commission shall adopt rules necessary to implement
this section. The rules must provide for:
(1) a procedure by which a tariff or rate schedule is to be
reviewed and approved;
(2) filing requirements and discovery consistent with
Subsection (a);
(3) an earnings monitoring report that allows the
commission to reasonably determine whether a utility is earning in

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excess of the utility's allowed return on investment as normalized

for weather;
(4) denial of the electric utility's filing if the electric
utility is earning more than the utility's authorized rate of return
on investment, on a weather-normalized basis, at the time the
periodic rate adjustment request is filed; and
(5) a mechanism by which the commission may refund
customers any amounts determined to be improperly recovered through a
periodic rate adjustment, including any interest on the amounts.
(h) An electric utility may file a request for a periodic rate
adjustment under this section on any day on which the commission is
open for business, except that if the utility has a base rate
proceeding pending, the utility may not file the request before the
185th day after the date the base rate proceeding was initiated. The
electric utility may revise a request to reflect the final order
issued in the base rate proceeding. The fact that an electric
utility has a base rate proceeding pending during a proceeding
conducted under this section does not establish grounds for dismissal
of either proceeding.
(h-1) Repealed by Acts 2017, 85th Leg., R.S., Ch. 200 (S.B. 735
), Sec. 5, eff. May 27, 2017.
(i) The commission shall enter a final order on a request for a
periodic rate adjustment under this section not later than the 60th
day after the date the request is filed. The commission may extend
the deadline for not more than 15 days for good cause.

Added by Acts 2011, 82nd Leg., R.S., Ch. 196 (S.B. 1693), Sec. 1, eff.
May 28, 2011.
Amended by:
Acts 2015, 84th Leg., R.S., Ch. 20 (S.B. 774), Sec. 1, eff.
September 1, 2015.
Acts 2017, 85th Leg., R.S., Ch. 200 (S.B. 735), Sec. 2, eff. May
27, 2017.
Acts 2017, 85th Leg., R.S., Ch. 200 (S.B. 735), Sec. 5, eff. May
27, 2017.
Acts 2023, 88th Leg., R.S., Ch. 1154 (S.B. 1015), Sec. 1, eff.
June 18, 2023.
Acts 2023, 88th Leg., R.S., Ch. 1154 (S.B. 1015), Sec. 2, eff.
June 18, 2023.

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For expiration of this section, see Subsection (f).

Sec. 36.211. RELATION BACK OF RATES FOR CERTAIN NON-ERCOT
UTILITIES. (a) This section applies only to an electric utility that
operates solely outside of ERCOT.
(b) In a rate proceeding under Subchapter D, or if requested by
an electric utility in the utility's statement of intent initiating a
rate proceeding under Subchapter C, notwithstanding Section
36.109(a), the final rate set in the proceeding, whether a rate
increase or rate decrease, shall be made effective for consumption on
and after the 155th day after the date the rate-filing package is
filed.
(c) The regulatory authority shall:
(1) require the electric utility to refund to customers
money collected in excess of the rate finally ordered on or after the
155th day after the date the rate-filing package is filed; or
(2) authorize the electric utility to surcharge bills to
recover the amount by which the money collected on or after the 155th
day after the date the rate-filing package is filed is less than the
money that would have been collected under the rate finally ordered.
(d) The regulatory authority may require refunds or surcharges
of amounts determined under Subsection (c) over a period not to
exceed 18 months, along with appropriate carrying costs. The
regulatory authority shall make any adjustments necessary to prevent
over-recovery of amounts reflected in riders in effect for the
electric utility during the pendency of the rate proceeding.
(e) A utility may not assess more than one surcharge authorized
by Subsection (c)(2) at the same time.
(f) This section expires September 1, 2031.

Added by Acts 2015, 84th Leg., R.S., Ch. 733 (H.B. 1535), Sec. 2, eff.
June 17, 2015.
Amended by:
Acts 2019, 86th Leg., R.S., Ch. 1067 (H.B. 1397), Sec. 2, eff.
June 14, 2019.

For expiration of this section, see Subsection (g).

Sec. 36.212. RATE CASE REQUIREMENT FOR CERTAIN NON-ERCOT
UTILITIES. (a) This section applies only to an electric utility
that operates solely outside of ERCOT.

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(b) The commission shall require an electric utility to make

the filings with regulatory authorities required by Subchapter B,
Chapter 33, and to file a rate-filing package under Subchapter D with
the commission to initiate a comprehensive base rate proceeding
before all of the utility's regulatory authorities:
(1) on or before the fourth anniversary of the date of the
final order in the electric utility's most recent comprehensive base
rate proceeding; or
(2) if, before the anniversary described by Subdivision
(1), the electric utility earns materially more than the utility's
authorized rate of return on investment, on a weather-normalized
basis, in the utility's two most recent consecutive commission
earnings monitoring reports.
(c) The electric utility must make the filings described by
Subsection (b) not later than the 120th day after the date the
commission notifies the utility of the requirement described by
Subsection (b). The 120-day period may be extended in the manner
provided by Section 36.153(b).
(d) The commission may extend the time period described by
Subsection (b)(1) and set a new deadline if the commission determines
that a comprehensive base rate case would not result in materially
different rates. The commission shall give interested parties a
reasonable opportunity to present materials and argument before
making a determination under this subsection.
(e) The commission shall adopt rules implementing this section,
including appropriate notice and scheduling requirements.
(f) This section does not limit the authority of a regulatory
authority under Subchapter D.
(g) This section expires September 1, 2031.

Added by Acts 2015, 84th Leg., R.S., Ch. 733 (H.B. 1535), Sec. 3, eff.
June 17, 2015.
Amended by:
Acts 2019, 86th Leg., R.S., Ch. 1067 (H.B. 1397), Sec. 3, eff.
June 14, 2019.

Sec. 36.213. ADJUSTMENT FOR CYBERSECURITY MONITOR COSTS FOR

CERTAIN UTILITIES. (a) This section does not apply to an electric
utility that operates solely outside of ERCOT and has not elected to

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participate in the cybersecurity monitor program under Section

39.1516.
(b) The commission, on its own motion or on the petition of an
electric utility, shall allow the electric utility to recover
reasonable and necessary costs incurred in connection with activities
under Section 39.1516.

Added by Acts 2019, 86th Leg., R.S., Ch. 610 (S.B. 936), Sec. 1, eff.
September 1, 2019.

For expiration of this section, see Subsection (h).

Sec. 36.214. RECOVERY OF GENERATION INVESTMENT BY NON-ERCOT
UTILITIES. (a) This section applies only to an electric utility
that operates solely outside of ERCOT.
(b) An electric utility may file, and the commission may
approve, an application for a rider to recover the electric utility's
investment in a power generation facility.
(c) An application under Subsection (b) may be filed by the
electric utility and approved by the commission before the electric
utility places the power generation facility in service.
(d) Any rider approved under Subsection (b) shall take effect
on the date the power generation facility begins providing service to
the electric utility's customers.
(e) Amounts recovered through a rider approved under Subsection
(b) are subject to reconciliation in the first comprehensive base
rate proceeding for the electric utility that occurs after approval
of the rider. During the reconciliation, the commission shall
determine if the amounts recovered through the rider are reasonable
and necessary.
(f) If a rider approved under Subsection (b) includes
incremental recovery for a power generation facility greater than
$200 million on a Texas jurisdictional basis, the electric utility
that filed the rider shall initiate a comprehensive base rate
proceeding at the commission not later than 18 months after the date
the rider takes effect.
(g) The commission shall adopt rules as necessary to implement
this section.
(h) This section expires September 1, 2031.

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Added by Acts 2019, 86th Leg., R.S., Ch. 1067 (H.B. 1397), Sec. 4,
eff. June 14, 2019.
Redesignated from Utilities Code, Section 36.213 by Acts 2021, 87th
Leg., R.S., Ch. 915 (H.B. 3607), Sec. 21.001(111), eff. September 1,
2021.

Sec. 36.215. RECOVERY OF INVESTMENT IN DISTRIBUTED GENERATION

AND RATES FOR BACKUP ELECTRIC SERVICE FOR CERTAIN NON-ERCOT
UTILITIES. (a) In this section:
(1) "Customer-sited distributed generation facility" means
a dispatchable generation facility that is installed on the electric
utility's side of the retail meter and owned and operated by the
electric utility:
(A) with a nameplate capacity of not more than 10
megawatts;
(B) that is capable of generating and providing backup
electric service to a customer during a power grid outage; and
(C) sited at or adjacent to the customer's premises.
(2) "Host customer" means a customer receiving backup
electric service under this section.
(b) This section applies only to an electric utility that
operates solely outside of ERCOT in areas of this state included in
the Southeastern Electric Reliability Council.
(c) An electric utility may provide backup electric service to
a nonresidential retail customer through a customer-sited distributed
generation facility.
(d) The commission, on the petition of an electric utility,
shall establish just and reasonable rates for backup electric service
supplied using a customer-sited distributed generation facility,
consistent with this chapter, provided that costs are allocated as
follows:
(1) if the facility is capable of directly supplying energy
to the distribution system or of disconnecting the host customer from
the distribution system when not being used to supply backup electric
service to the host customer and thereby reducing system load, the
commission shall allocate the cost of owning and operating the
facility between the host customer and the electric utility's broader
customer base, including an allocation of any margins from energy
sales attributable to the facility to the host customer in reasonable

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proportion to the allocation of nonfuel costs as provided by

Subdivision (2); and
(2) the allocation of nonfuel costs to the host customer
must be based on the cost to purchase, install, interconnect, own,
operate, and maintain the facility that is above the electric
utility's levelized avoided cost to install, own, operate, and
maintain a single-cycle combustion turbine, on a per kilowatt basis,
grossed up for avoided line losses based on the utility's
transmission and distribution line loss factors last approved by the
commission.
(e) In a rate proceeding in which an electric utility seeks to
recover the utility's investment in a customer-sited distributed
generation facility that is interconnected to the utility's
distribution system:
(1) the full cost of the utility's investment is eligible
for recovery; and
(2) the cost of the facility and backup electric service
revenues must be allocated among customer classes on the same basis
used to allocate the utility's distribution-level investments.

Added by Acts 2023, 88th Leg., R.S., Ch. 103 (S.B. 1866), Sec. 1, eff.
May 19, 2023.

SUBCHAPTER H. RATES FOR GOVERNMENTAL ENTITIES

Sec. 36.351. DISCOUNTED RATES FOR CERTAIN INSTITUTIONS OF
HIGHER EDUCATION. (a) Notwithstanding any other provision of this
title, each electric utility and municipally owned utility shall
discount charges for electric service provided to a facility of a
four-year state university, upper-level institution, Texas State
Technical College, or college.
(b) The discount is a 20-percent reduction of the utility's
base rates that would otherwise be paid under the applicable tariffed
rate.
(c) An electric or municipally owned utility is exempt from
this section if the 20-percent discount results in a reduction equal
to more than one percent of the utility's total annual revenues.
(d) A municipally owned utility is exempt from this section if
the municipally owned utility, on September 1, 1995, discounted base
commercial rates for electric service provided to all four-year state

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universities or colleges in its service area by 20 percent or more.

(e) This section does not apply to a rate charged to an
institution of higher education by a municipally owned utility that
provides a discounted rate to the state for electric services below
rates in effect on January 1, 1995, if the discounted rate provides a
greater financial discount to the state than is provided to the
institution of higher education through the discount provided by this
section.
(f) An investor-owned electric utility may not recover from
residential customers or any other customer class the assigned and
allocated costs of serving a state university or college that
receives a discount under this section.
(g) Each electric utility shall file tariffs with the
commission reflecting the discount required under this section. The
initial tariff filing is not a rate change for purposes of Subchapter
C.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 36.352. SPECIAL RATE CLASS. Notwithstanding any other

provision of this title, if the commission, on or before September 1,
1995, approved the establishment of a separate rate class for
electric service for a university and grouped public schools in a
separate rate class, the commission shall include community colleges
in the rate class with public school customers.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 36.353. PAYMENT IN LIEU OF TAX. (a) A payment made in

lieu of a tax by a municipally owned utility to the municipality by
which the utility is owned may not be considered an expense of
operation in establishing the utility's rate for providing utility
service to a school district or hospital district.
(b) A rate a municipally owned utility receives from a school
district or hospital district may not be used to make or to cover the
cost of making payments in lieu of taxes to the municipality that
owns the utility.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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Sec. 36.354. DISCOUNTED RATES FOR MILITARY BASES. (a)

Notwithstanding any other provision of this title, each municipally
owned utility, electric cooperative, or electric utility in an area
where customer choice is not available or the commission has delayed
the implementation of full customer choice in accordance with Section
39.103 shall discount charges for electric service provided to a
military base.
(b) The discount under Subsection (a) is a 20 percent reduction
of the base commercial rate that the municipally owned utility,
electric cooperative, or electric utility would otherwise charge the
military installation.
(c) An electric utility, municipally owned utility, or electric
cooperative may assess a surcharge to all of the utility's retail
customers in the state to recover the difference in revenue between
the revenues from the discounted rate for military bases provided
under Subsection (a) and the base commercial rate. This subsection
does not apply to an electric utility, municipally owned utility, or
electric cooperative that was providing electric service to a
military base on December 31, 2002, at a rate constituting a discount
of 20 percent or more from the utility's base commercial rate that
the utility would otherwise charge the military base.
(d) Each electric utility shall file a tariff with the
commission reflecting the discount required by Subsection (a) and may
file a tariff reflecting the surcharge provided by Subsection (c).
Not later than the 30th day after the date the commission receives
the electric utility's tariff reflecting the surcharge, the
commission shall approve the tariff. A proceeding under this
subsection is not a rate change for purposes of Subchapter C.
(e) An electric utility, municipally owned utility, or electric
cooperative is exempt from the requirements of Subsection (a) if:
(1) the 20 percent discount would result in a reduction of
revenue in an amount that is greater than one percent of the
utility's total annual revenues; or
(2) the utility:
(A) was providing electric service to a military base
on December 31, 2002, at a rate constituting a discount of 20 percent
or more from the utility's base commercial rate that the utility
would otherwise charge the military base; and

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(B) continues to provide electric service to the

military base at a rate constituting a discount of 20 percent or more
from the utility's base commercial rate that the utility would
otherwise charge the military base.
(f) Each electric utility shall provide the Texas Military
Preparedness Commission with the base commercial rate that the
utility would otherwise charge the military base and the rate the
utility is charging the military base.
(g) For the purposes of this section, the term "military base"
does not include a military base:
(1) that has been closed or realigned under the Defense
Base Closure and Realignment Act of 1990 (10 U.S.C. Section 2687) and
its subsequent amendments;
(2) that is administered by an authority established by a
municipality under Chapter 379B, Local Government Code;
(3) that is operated by or for the benefit of the Texas
National Guard, as defined by Section 437.001, Government Code,
unless the base is served by a municipally owned utility owned by a
city with a population of 900,000 or more; or
(4) for which a municipally owned utility has acquired the
electric distribution system under 10 U.S.C. Section 2688.

Added by Acts 2003, 78th Leg., ch. 149, Sec. 21, eff. May 27, 2003.
Amended by:
Acts 2013, 83rd Leg., R.S., Ch. 1217 (S.B. 1536), Sec. 3.23, eff.
September 1, 2013.
Acts 2023, 88th Leg., R.S., Ch. 644 (H.B. 4559), Sec. 271, eff.
September 1, 2023.

SUBCHAPTER I.
SECURITIZATION FOR RECOVERY OF SYSTEM
RESTORATION COSTS
Sec. 36.401. SECURITIZATION FOR RECOVERY OF SYSTEM RESTORATION
COSTS; PURPOSE. (a) The purpose of this subchapter is to enable an
electric utility to obtain timely recovery of system restoration
costs and to use securitization financing to recover these costs,
because that type of debt will lower the carrying costs associated
with the recovery of these costs, relative to the costs that would be
incurred using conventional financing methods. The proceeds of the
transition bonds may be used only for the purposes of reducing the

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amount of recoverable system restoration costs, as determined by the

commission in accordance with this subchapter, including the
refinancing or retirement of utility debt or equity.
(b) It is the intent of the legislature that:
(1) securitization of system restoration costs will be
accomplished using the same procedures, standards, and protections
for securitization authorized under Subchapter G, Chapter 39, as in
effect on the effective date of this section, except as provided by
this subchapter; and
(2) the commission will ensure that securitization of
system restoration costs provides greater tangible and quantifiable
benefits to ratepayers than would have been achieved without the
issuance of transition bonds.

Added by Acts 2009, 81st Leg., R.S., Ch. 1 (S.B. 769), Sec. 1, eff.
April 16, 2009.

Sec. 36.402. SYSTEM RESTORATION COSTS; STANDARDS AND

DEFINITIONS. (a) In this subchapter, "system restoration costs"
means reasonable and necessary costs, including costs expensed,
charged to self-insurance reserves, deferred, capitalized, or
otherwise financed, that are incurred by an electric utility due to
any activity or activities conducted by or on behalf of the electric
utility in connection with the restoration of service and
infrastructure associated with electric power outages affecting
customers of the electric utility as the result of any tropical storm
or hurricane, ice or snow storm, flood, or other weather-related
event or natural disaster that occurred in calendar year 2008 or
thereafter. System restoration costs include mobilization, staging,
and construction, reconstruction, replacement, or repair of electric
generation, transmission, distribution, or general plant facilities.
System restoration costs shall include reasonable estimates of the
costs of an activity or activities conducted or expected to be
conducted by or on behalf of the electric utility in connection with
the restoration of service or infrastructure associated with electric
power outages, but such estimates shall be subject to true-up and
reconciliation after the actual costs are known. System restoration
costs include reasonable and necessary weatherization and storm-
hardening costs incurred, as well as reasonable estimates of costs to

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be incurred, by the electric utility, but such estimates shall be

subject to true-up and reconciliation after the actual costs are
known.
(b) System restoration costs shall include carrying costs at
the electric utility's weighted average cost of capital as last
approved by the commission in a general rate proceeding from the date
on which the system restoration costs were incurred until the date
that transition bonds are issued or until system restoration costs
are otherwise recovered pursuant to the provisions of this
subchapter.
(c) To the extent a utility subject to this subchapter receives
insurance proceeds, governmental grants, or any other source of
funding that compensate it for system restoration costs, those
amounts shall be used to reduce the utility's system restoration
costs recoverable from customers. If the timing of a utility's
receipt of those amounts prevents their inclusion as a reduction to
the system restoration costs that are securitized, or the commission
later determines as a result of the true-up and reconciliation
provided for in Subsection (a) that the actual costs incurred are
less than estimated costs included in the determination of system
restoration costs, the commission shall take those amounts into
account in:
(1) the utility's next base rate proceeding; or
(2) any subsequent proceeding, other than a true-up
proceeding under Section 39.307, in which the commission considers
system restoration costs.
(d) If the commission determines that the insurance proceeds,
governmental grants, or other sources of funding that compensate the
electric utility for system restoration costs, or the amount
resulting from a true-up of estimated system restoration costs are of
a magnitude to justify a separate tariff rider, the commission may
establish a tariff rider to credit such amounts against charges,
other than transition charges or system restoration charges as
defined in Section 36.403, being collected from customers.
(e) To the extent that the electric utility receives insurance
proceeds, governmental grants, or any other source of funding that is
used to reduce system restoration costs, the commission shall impute
interest on those amounts at the same cost of capital included in the
utility's system restoration costs until the date that those amounts
are used to reduce the amount of system restoration costs that are

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securitized or otherwise reflected in the rates of the utility.

Added by Acts 2009, 81st Leg., R.S., Ch. 1 (S.B. 769), Sec. 1, eff.
April 16, 2009.
Amended by:
Acts 2021, 87th Leg., R.S., Ch. 198 (H.B. 1510), Sec. 1, eff.
June 1, 2021.

Sec. 36.403. STANDARDS AND PROCEDURES GOVERNING SECURITIZATION

AND RECOVERY OF SYSTEM RESTORATION COSTS. (a) The procedures and
standards of this subchapter and the provisions of Subchapter G,
Chapter 39, govern an electric utility's application for, and the
commission's issuance of, a financing order to provide for the
securitization of system restoration costs, or to otherwise provide
for the recovery of system restoration costs.
(b) Subject to the standards, procedures, and tests contained
in this subchapter and Subchapter G, Chapter 39, the commission shall
adopt a financing order on the application of the electric utility to
recover its system restoration costs. If on its own motion or
complaint by an affected person, the commission determines that it is
likely that securitization of system restoration costs would meet the
tests contained in Section 36.401(b), the commission shall require
the utility to file an application for a financing order. On the
commission's issuance of a financing order allowing for recovery and
securitization of system restoration costs, the provisions of this
subchapter and Subchapter G, Chapter 39, continue to govern the
financing order and the rights and interests established in the
order, and this subchapter and Subchapter G, Chapter 39, continue to
govern any transition bonds issued pursuant to the financing order.
To the extent any conflict exists between the provisions of this
subchapter and Subchapter G, Chapter 39, in cases involving the
securitization of system restoration costs, the provisions of this
subchapter control.
(c) For purposes of this subchapter, "financing order," as
defined by Section 39.302 and as used in Subchapter G, Chapter 39,
includes a financing order authorizing the securitization of system
restoration costs.
(d) For purposes of this subchapter, "qualified costs," as
defined by Section 39.302 and as used in Subchapter G, Chapter 39,

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includes 100 percent of the electric utility's system restoration

costs, net of any insurance proceeds, governmental grants, or other
source of funding that compensate the utility for system restoration
costs, received by the utility at the time it files an application
for a financing order. Qualified costs also include the costs of
issuing, supporting, and servicing transition bonds and any costs of
retiring and refunding existing debt and equity securities of an
electric utility subject to this subchapter in connection with the
issuance of transition bonds. For purposes of this subchapter, the
term qualified costs also includes:
(1) the costs to the commission of acquiring professional
services for the purpose of evaluating proposed transactions under
this subchapter; and
(2) costs associated with ancillary agreements such as any
bond insurance policy, letter of credit, reserve account, surety
bond, swap arrangement, hedging arrangement, liquidity or credit
support arrangement, or other financial arrangement entered into in
connection with the issuance or payment of transition bonds.
(e) For purposes of this subchapter, "transition bonds," as
defined by Section 39.302 and as used in Subchapter G, Chapter 39,
includes transition bonds issued in association with the recovery of
system restoration costs. Transition bonds issued to securitize
system restoration costs may be called "system restoration bonds" or
may be called by any other name acceptable to the issuer and the
underwriters of the transition bonds.
(f) For purposes of this subchapter, "transition charges," as
defined by Section 39.302 and as used in Subchapter G, Chapter 39,
includes nonbypassable amounts to be charged for the use of electric
services, approved by the commission under a financing order to
recover system restoration costs, that shall be collected by an
electric utility, its successors, an assignee, or other collection
agents as provided for in the financing order. Transition charges
approved by the commission under a financing order to recover system
restoration costs may be called "system restoration charges" or may
be called by any other name acceptable to the issuer and the
underwriters of the transition bonds.
(g) Notwithstanding Section 39.303(c), system restoration costs
shall be functionalized and allocated to customers in the same manner
as the corresponding facilities and related expenses are
functionalized and allocated in the electric utility's current base

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rates. For an electric utility operating within the Electric

Reliability Council of Texas, system restoration costs that are
properly includable in the transmission cost of service mechanism
adopted under Section 35.004 and associated deferred costs not
included under Section 35.004 shall be recovered under the method of
pricing provided for in that section and commission rules promulgated
under that section; provided, however, that an electric utility
operating under a rate freeze or other limitation on its ability to
pass through wholesale costs to its customers may defer such costs
and accrue carrying costs at its weighted average cost of capital as
last approved by the commission in a general rate proceeding until
such time as the freeze or limitation expires.
(h) The amount of any accumulated deferred federal income taxes
offset, used to determine the securitization total, may not be
considered in future rate proceedings. Any tax obligation of the
electric utility arising from its receipt of securitization bond
proceeds, or from the collection and remittance of transition
charges, shall be recovered by the electric utility through the
commission's implementation of this subchapter.
(i) Notwithstanding a rate freeze or limitations on an electric
utility's ability to change rates authorized or imposed by any other
provision of this title or by a regulatory authority, an electric
utility is entitled to recover system restoration costs consistent
with the provisions of this subchapter.
(j) If in the course of a proceeding to adopt a financing order
the commission determines that the recovery of all or any portion of
an electric utility's system restoration costs, using securitization,
is not beneficial to ratepayers of the electric utility, under one or
more of the tests applied to determine those benefits, the commission
shall nonetheless use the proceeding to issue an order permitting the
electric utility to recover the remainder of its system restoration
costs through an appropriate customer surcharge mechanism, including
carrying costs at the electric utility's weighted average cost of
capital as last approved by the commission in a general rate
proceeding, to the extent that the electric utility has not
securitized those costs. A rate proceeding under Subchapter C or D
shall not be required to determine and implement this surcharge
mechanism. On the final implementation of rates resulting from the
filing of a rate proceeding under Subchapter C or D that provides for
the recovery of all remaining system restoration costs, a rider or

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surcharge mechanism adopted under this subsection shall expire. This

subsection is limited to instances in which an electric utility has
incurred system restoration costs of $100 million or more in any
calendar year after January 1, 2008.

Added by Acts 2009, 81st Leg., R.S., Ch. 1 (S.B. 769), Sec. 1, eff.
April 16, 2009.

Sec. 36.404. NONBYPASSABLE CHARGES. The commission shall

include terms in the financing order to ensure that the imposition
and collection of transition charges associated with the recovery of
system restoration costs are nonbypassable by imposing restrictions
on bypassability of the type provided for in Chapter 39 or by
alternative means of ensuring nonbypassability, as the commission
considers appropriate, consistent with the purposes of
securitization.

Added by Acts 2009, 81st Leg., R.S., Ch. 1 (S.B. 769), Sec. 1, eff.
April 16, 2009.

Sec. 36.405. DETERMINATION OF SYSTEM RESTORATION COSTS. (a)

An electric utility is entitled to recover system restoration costs
consistent with the provisions of this subchapter and is entitled to
seek recovery of amounts not recovered under this subchapter,
including system restoration costs not yet incurred at the time an
application is filed under Subsection (b), in its next base rate
proceeding or through any other proceeding authorized by Subchapter C
or D.
(b) An electric utility may file an application with the
commission seeking a determination of the amount of system
restoration costs eligible for recovery and securitization. The
commission may by rule prescribe the form of the application and the
information reasonably needed to support the application; provided,
however, that if such a rule is not in effect, the electric utility
shall not be precluded from filing its application and such
application cannot be rejected as being incomplete.
(c) The commission shall issue an order determining the amount
of system restoration costs eligible for recovery and securitization
not later than the 150th day after the date an electric utility files

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its application. The 150-day period begins on the date the electric
utility files the application, even if the filing occurs before the
effective date of this section.
(d) An electric utility may file an application for a financing
order prior to the expiration of the 150-day period provided for in
Subsection (c). The commission shall issue a financing order not
later than 90 days after the utility files its request for a
financing order; provided, however, that the commission need not
issue the financing order until it has determined the amount of
system restoration costs eligible for recovery and securitization.
(e) To the extent the commission has made a determination of
the eligible system restoration costs of an electric utility before
the effective date of this section, that determination may provide
the basis for the utility's application for a financing order
pursuant to this subchapter and Subchapter G, Chapter 39. A previous
commission determination does not preclude the utility from
requesting recovery of additional system restoration costs eligible
for recovery under this subchapter, but not previously authorized by
the commission.
(f) A rate proceeding under Subchapter C or D shall not be
required to determine the amount of recoverable system restoration
costs, as provided by this section, or for the issuance of a
financing order.
(g) A commission order under this subchapter is not subject to
rehearing. A commission order may be reviewed by appeal only to a
Travis County district court by a party to the proceeding filed
within 15 days after the order is signed by the commission. The
judgment of the district court may be reviewed only by direct appeal
to the Supreme Court of Texas filed within 15 days after entry of
judgment. All appeals shall be heard and determined by the district
court and the Supreme Court of Texas as expeditiously as possible
with lawful precedence over other matters. Review on appeal shall be
based solely on the record before the commission and briefs to the
court and shall be limited to whether the order conforms to the
constitution and laws of this state and the United States and is
within the authority of the commission under this chapter.

Added by Acts 2009, 81st Leg., R.S., Ch. 1 (S.B. 769), Sec. 1, eff.
April 16, 2009.

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Sec. 36.406. SEVERABILITY. Effective on the date the first

utility transition bonds associated with system restoration costs are
issued under this subchapter, if any provision in this title or
portion of this title is held to be invalid or is invalidated,
superseded, replaced, repealed, or expires for any reason, that
occurrence does not affect the validity or continuation of this
subchapter, Subchapter G, Chapter 39, as it applies to this
subchapter, or any part of those provisions, or any other provision
of this title that is relevant to the issuance, administration,
payment, retirement, or refunding of transition bonds or to any
actions of the electric utility, its successors, an assignee, a
collection agent, or a financing party, and those provisions shall
remain in full force and effect.

Added by Acts 2009, 81st Leg., R.S., Ch. 1 (S.B. 769), Sec. 1, eff.
April 16, 2009.

SUBCHAPTER J. LOWER-COST FINANCING MECHANISM FOR SECURITIZATION FOR

RECOVERY OF SYSTEM RESTORATION COSTS
Sec. 36.451. PURPOSE AND APPLICABILITY. (a) Except as
otherwise specifically provided by this subchapter, the same
procedures, standards, and protections for securitization authorized
by Subchapter I of this chapter and, to the extent made applicable to
Subchapter I of this chapter, by Subchapter G, Chapter 39, apply to
the lower-cost financing mechanism for securitization of transition
costs or system restoration costs as provided by Subchapter I. To the
extent of any conflict between the provisions of this subchapter and
Subchapter I of this chapter or, to the extent made applicable by
Subchapter I of this chapter, Subchapter G, Chapter 39, in cases
involving the securitization of system restoration costs under this
subchapter, the provisions of this subchapter control.
(b) The purpose of this subchapter is to make available a
lower-cost, supplemental financing mechanism to allow an electric
utility operating solely outside of ERCOT to obtain timely recovery
of system restoration costs under Subchapter I through securitization
and the issuance of transition bonds or system restoration bonds by
an issuer other than the electric utility or an affiliated special
purpose entity. Financing of system restoration costs under this
subchapter is a valid and essential public purpose.

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(c) The Texas Electric Utility System Restoration Corporation

is created under this subchapter as a special purpose public
corporation and instrumentality of the state for the essential public
purpose of providing a lower-cost, supplemental financing mechanism
available to the commission and an electric utility to attract low-
cost capital to finance system restoration costs.
(d) In approving securitization under this subchapter, the
commission shall ensure that customers are not harmed as a result of
any financing through the Texas Electric Utility System Restoration
Corporation and that any financial savings or other benefits are
appropriately reflected in customer rates.
(e) System restoration bonds issued under this subchapter will
be solely the obligation of the issuer and the corporation as
borrower, if applicable, and will not be a debt of or a pledge of the
faith and credit of the state.
(f) System restoration bonds issued under this subchapter shall
be nonrecourse to the credit or any assets of the state and the
commission.
(g) This subchapter does not limit or impair the commission's
jurisdiction under this title to regulate the rates charged and the
services rendered by electric utilities in this state.
(h) An electric utility receiving the proceeds of
securitization financing under this subchapter is not required to
provide utility services to the corporation or the state as a result
of receiving such proceeds except in the role of the corporation or
the state as a customer of the electric utility. This subchapter does
not create an obligation of the corporation or an issuer to provide
electric services to the electric utility or its customers.

Added by Acts 2021, 87th Leg., R.S., Ch. 198 (H.B. 1510), Sec. 2, eff.
June 1, 2021.

Sec. 36.452. DEFINITIONS. (a) In this subchapter:

(1) "Corporation" means the Texas Electric Utility System
Restoration Corporation.
(2) "Issuer" means the corporation or any other
corporation, public trust, public instrumentality, or entity that
issues system restoration bonds approved by a financing order.
(b) For the purposes of this subchapter, "qualified costs," as

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defined by Section 39.302 and as used in Subchapter G, Chapter 39,

also includes all costs of establishing, maintaining, and operating
the corporation and all costs of the corporation and an issuer in
connection with the issuance and servicing of the system restoration
bonds, all as approved in the financing order.
(c) Except as otherwise specifically provided by this
subchapter, any defined terms provided by Subchapter I of this
chapter and, if made applicable by Subchapter I of this chapter,
Subchapter G, Chapter 39, have the same meaning in this subchapter.

Added by Acts 2021, 87th Leg., R.S., Ch. 198 (H.B. 1510), Sec. 2, eff.
June 1, 2021.

Sec. 36.453. CREATION OF CORPORATION. (a) The corporation is a

nonprofit corporation and instrumentality of the state, and shall
perform the essential governmental function of financing system
restoration costs in accordance with this subchapter. The
corporation:
(1) shall perform only functions consistent with this
subchapter;
(2) shall exercise its powers through a governing board;
(3) is subject to the regulation of the commission; and
(4) has a legal existence as a public corporate body and
instrumentality of the state separate and distinct from the state.
(b) Assets of the corporation may not be considered part of any
state fund. The state may not budget for or provide any state money
to the corporation. The debts, claims, obligations, and liabilities
of the corporation may not be considered to be a debt of the state or
a pledge of its credit.
(c) The corporation must be self-funded. Before the imposition
of transition charges or system restoration charges, the corporation
may accept and expend for its operating expenses money that may be
received from any source, including financing agreements with the
state, a commercial bank, or another entity to:
(1) finance the corporation's obligations until the
corporation receives sufficient transition property to cover its
operating expenses as financing costs; and
(2) repay any short-term borrowing under any such financing
agreements.

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(d) The corporation has the powers, rights, and privileges

provided for a corporation organized under Chapter 22, Business
Organizations Code, subject to the express exceptions and limitations
provided by this subchapter.
(e) An organizer selected by the executive director of the
commission shall prepare the certificate of formation of the
corporation under Chapters 3 and 22, Business Organizations Code. The
certificate of formation must be consistent with the provisions of
this subchapter.
(f) State officers and agencies are authorized to render
services to the corporation, within their respective functions, as
may be requested by the commission or the corporation.
(g) The corporation or an issuer may:
(1) retain professionals, financial advisors, and
accountants the corporation or issuer considers necessary to fulfill
the corporation's or issuer's duties under this subchapter; and
(2) determine the duties and compensation of a person
retained under Subdivision (1), subject to the approval of the
commission.
(h) The corporation is governed by a board of five directors
appointed by the commission for two-year terms.
(i) An official action of the board requires the favorable vote
of a majority of the directors present and voting at a meeting of the
board.

Added by Acts 2021, 87th Leg., R.S., Ch. 198 (H.B. 1510), Sec. 2, eff.
June 1, 2021.

Sec. 36.454. POWERS AND DUTIES OF CORPORATION. (a) The

corporation, in each instance subject to the prior authorization of
the commission, shall participate in the financial transactions
authorized by this subchapter. The corporation may not engage in
business activities except those activities provided for in this
subchapter and those ancillary and incidental thereto. The
corporation or an issuer may not apply proceeds of system restoration
bonds or system restoration charges to a purpose not specified in a
financing order, to a purpose in an amount that exceeds the amount
allowed for such purpose in the order, or to a purpose in
contravention of the order.

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(b) The board of the corporation, under the provisions of this

subchapter, may employ or retain persons as are necessary to perform
the duties of the corporation.
(c) The corporation may:
(1) acquire, sell, pledge, or transfer transition property
as necessary to effect the purposes of this subchapter and, in
connection with the action, agree to such terms and conditions as the
corporation deems necessary and proper, consistent with the terms of
a financing order:
(A) to acquire transition property and to pledge such
transition property, and any other collateral:
(i) to secure payment of system restoration bonds
issued by the corporation, together with payment of any other
qualified costs; or
(ii) to secure repayment of any borrowing from any
other issuer of system restoration bonds; or
(B) to sell the transition property to another issuer,
which may in turn pledge that transition property, together with any
other collateral, to the repayment of system restoration bonds issued
by the issuer together with any other qualified costs;
(2) issue system restoration bonds on terms and conditions
consistent with a financing order;
(3) borrow funds from an issuer of system restoration bonds
to acquire transition property, and pledge that transition property
to the repayment of any borrowing from an issuer, together with any
related qualified costs, all on terms and conditions consistent with
a financing order;
(4) sue or be sued in its corporate name;
(5) intervene as a party before the commission or any court
in this state in any matter involving the corporation's powers and
duties;
(6) negotiate and become a party to contracts as necessary,
convenient, or desirable to carry out the purposes of this
subchapter; and
(7) engage in corporate actions or undertakings that are
permitted for nonprofit corporations in this state and that are not
prohibited by, or contrary to, this subchapter.
(d) The corporation shall maintain separate accounts and
records relating to each electric utility that collects system
restoration charges for all charges, revenues, assets, liabilities,

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and expenses relating to that utility's related system restoration

bond issuances.
(e) The board of the corporation may not authorize any
rehabilitation, liquidation, or dissolution of the corporation and a
rehabilitation, liquidation, or dissolution of the corporation may
not take effect as long as any system restoration bonds are
outstanding unless adequate protection and provision have been made
for the payment of the bonds pursuant to the documents authorizing
the issuance of the bonds. In the event of any rehabilitation,
liquidation, or dissolution, the assets of the corporation must be
applied first to pay all debts, liabilities, and obligations of the
corporation, including the establishment of reasonable reserves for
any contingent liabilities or obligations, and all remaining funds of
the corporation must be applied and distributed as provided by an
order of the commission.
(f) Before the date that is two years and one day after the
date that the corporation no longer has any payment obligation with
respect to any system restoration bonds, including any obligation to
an issuer of any system restoration bonds outstanding, the
corporation may not file a voluntary petition under federal
bankruptcy law and neither any public official nor any organization,
entity, or other person may authorize the corporation to be or to
become a debtor under federal bankruptcy law during that period. The
state covenants that it will not limit or alter the denial of
authority under this subsection or Subsection (e), and the provisions
of this subsection and Subsection (e) are hereby made a part of the
contractual obligation that is subject to the state pledge set forth
in Section 39.310.
(g) The corporation shall prepare and submit to the commission
for approval an annual operating budget. If requested by the
commission, the corporation shall prepare and submit an annual report
containing the annual operating and financial statements of the
corporation and any other appropriate information.

Added by Acts 2021, 87th Leg., R.S., Ch. 198 (H.B. 1510), Sec. 2, eff.
June 1, 2021.

Sec. 36.455. COMMISSION REGULATION OF CORPORATION. The

commission shall regulate the corporation as provided by this

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subchapter and consistent with the manner in which it regulates

public utilities. Notwithstanding the regulation authorized by this
section, the corporation is not a public utility.

Added by Acts 2021, 87th Leg., R.S., Ch. 198 (H.B. 1510), Sec. 2, eff.
June 1, 2021.

Sec. 36.456. FINANCING ORDER. (a) This section applies to the

commission's issuance of a financing order under this subchapter.
(b) Except as otherwise specifically provided by this
subchapter, the provisions of Subchapter I of this chapter and, to
the extent made applicable to Subchapter I of this chapter,
Subchapter G, Chapter 39, that address the commission's issuance of a
financing order apply to the commission's issuance of a financing
order under this subchapter.
(c) The corporation and any issuer must be a party to the
commission's proceedings that address the issuance of a financing
order along with the relevant electric utility.
(d) In addition to the requirements of Subchapter I, as
applicable, a financing order issued under this subchapter must:
(1) require the sale, assignment, or other transfer to the
corporation of certain specified transition property created by the
financing order in the manner contemplated by Section 39.308, and,
following that sale, assignment, or transfer, require that system
restoration charges paid under any financing order be created,
assessed, and collected as the property of the corporation, subject
to subsequent sale, assignment, or transfer by the corporation as
authorized under this subchapter;
(2) authorize:
(A) the issuance of system restoration bonds by the
corporation secured by a pledge of specified transition property, and
the application of the proceeds of those system restoration bonds,
net of issuance costs, to the acquisition of the transition property
from the electric utility; or
(B) the acquisition of specified transition property
from the electric utility by the corporation financed:
(i) by a loan by an issuer to the corporation of
the proceeds of system restoration bonds, net of issuance costs,
secured by a pledge of the specified transition property; or

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(ii) by the acquisition by an issuer from the

corporation of the transition property financed from the net proceeds
of transition bonds issued by the issuer; and
(3) authorize the electric utility to serve as collection
agent to collect the system restoration charges and transfer the
collected charges to the corporation, the issuer, or a financing
party, as appropriate.
(e) After issuance of the financing order, the corporation
shall arrange for the issuance of system restoration bonds as
specified in the financing order by it or another issuer selected by
the corporation and approved by the commission.
(f) System restoration bonds issued pursuant to a financing
order under this section are secured only by the related transition
property and any other funds pledged under the bond documents. No
assets of the state or electric utility are subject to claims by such
bondholders. Notwithstanding the provisions of Subchapter G, Chapter
39, following assignment of the transition property, the electric
utility does not have any beneficial interest or claim of right in
such system restoration charges or in any transition property.

Added by Acts 2021, 87th Leg., R.S., Ch. 198 (H.B. 1510), Sec. 2, eff.
June 1, 2021.

Sec. 36.457. SEVERABILITY. Effective on the date the first

system restoration bonds associated with system restoration costs are
issued under this subchapter, if any provision in this title or
portion of this title is held to be invalid or is invalidated,
superseded, replaced, repealed, or expires for any reason, that
occurrence does not affect the validity or continuation of this
subchapter, Subchapter I of this chapter, as that subchapter applies
to this subchapter, Subchapter G, Chapter 39, as that subchapter
applies to this subchapter, or any part of those provisions, or any
other provision of this title that is relevant to the issuance,
administration, payment, retirement, or refunding of system
restoration bonds or to any actions of the electric utility, its
successors, an assignee, a collection agent, the corporation, an
issuer, or a financing party, and those provisions shall remain in
full force and effect.

Added by Acts 2021, 87th Leg., R.S., Ch. 198 (H.B. 1510), Sec. 2, eff.

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June 1, 2021.

CHAPTER 37. CERTIFICATES OF CONVENIENCE AND NECESSITY

SUBCHAPTER A. DEFINITIONS
Sec. 37.001. DEFINITIONS. In this chapter:
(1) "Certificate" means a certificate of convenience and
necessity.
(2) "Electric utility" includes an electric cooperative.
(3) "Retail electric utility" means a person, political
subdivision, electric cooperative, or agency that operates,
maintains, or controls in this state a facility to provide retail
electric utility service. The term does not include a corporation
described by Section 32.053 to the extent that the corporation sells
electricity exclusively at wholesale and not to the ultimate
consumer. A qualifying cogenerator that sells electric energy at
retail to the sole purchaser of the cogenerator's thermal output
under Sections 35.061 and 36.007 is not for that reason considered to
be a retail electric utility. The owner or operator of a qualifying
cogeneration facility who was issued the necessary environmental
permits from the Texas Natural Resource Conservation Commission after
January 1, 1998, and who commenced construction of such qualifying
facility before July 1, 1998, may provide electricity to the
purchasers of the thermal output of that qualifying facility and
shall not for that reason be considered an electric utility or a
retail electric utility, provided that the purchasers of the thermal
output are owners of manufacturing or process operation facilities
that are located on a site entirely owned before September, 1987, by
one owner who retained ownership after September, 1987, of some
portion of the facilities and that those facilities now share some
integrated operations, such as the provision of services and raw
materials. A person who is an electric generation equipment lessor
or operator is not for that reason considered to be a retail electric
utility. A person who owns or operates equipment used solely to
provide electricity charging service for consumption by an
alternatively fueled vehicle, as defined by Section 502.004,
Transportation Code, is not for that reason considered to be a retail
electric utility.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended

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by Acts 1999, 76th Leg., ch. 405, Sec. 29, eff. Sept. 1, 1999.
Amended by:
Acts 2021, 87th Leg., R.S., Ch. 255 (H.B. 1572), Sec. 2, eff.
September 1, 2021.
Acts 2021, 87th Leg., R.S., Ch. 389 (S.B. 1202), Sec. 3, eff.
September 1, 2021.

Sec. 37.002. CHARGING SERVICE. The commission may by rule

exempt from the definition of "retail electric utility" under Section
37.001 a provider who owns or operates equipment used solely to
provide electricity charging service for a mode of transportation.

Added by Acts 2021, 87th Leg., R.S., Ch. 389 (S.B. 1202), Sec. 4, eff.
September 1, 2021.

SUBCHAPTER B. CERTIFICATE OF CONVENIENCE AND NECESSITY

Sec. 37.051. CERTIFICATE REQUIRED. (a) An electric utility
may not directly or indirectly provide service to the public under a
franchise or permit unless the utility first obtains from the
commission a certificate that states that the public convenience and
necessity requires or will require the installation, operation, or
extension of the service.
(b) Except as otherwise provided by this chapter, a retail
electric utility may not furnish or make available retail electric
utility service to an area in which retail electric utility service
is being lawfully furnished by another retail electric utility unless
the utility first obtains a certificate that includes the area in
which the consuming facility is located.
(c) Notwithstanding any other provision of this chapter,
including Subsection (a), an electric cooperative is not required to
obtain a certificate of public convenience and necessity for the
construction, installation, operation, or extension of any generating
facilities or necessary interconnection facilities.
(c-1) Notwithstanding any other provision of this title except
Section 11.009, and except as provided by Subsection (c-2), a person,
including an electric utility or municipally owned utility, may not
interconnect a facility to the ERCOT transmission grid that enables
additional power to be imported into or exported out of the ERCOT

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power grid unless the person obtains a certificate from the

commission stating that public convenience and necessity requires or
will require the interconnection. The person must apply for the
certificate not later than the 180th day before the date the person
seeks any order from the Federal Energy Regulatory Commission related
to the interconnection. The commission shall apply Section 37.056 in
considering an application under this subsection. In addition, the
commission must determine that the application is consistent with the
public interest before granting the certificate. The commission may
adopt rules necessary to implement this subsection. This subsection
does not apply to a facility that is in service on December 31, 2014.
(c-2) The commission, not later than the 185th day after the
date the application is filed, shall approve an application filed
under Subsection (c-1) for a facility that is to be constructed under
an interconnection agreement appended to an offer of settlement
approved in a final order of the Federal Energy Regulatory Commission
that was issued in Docket No. TX11-01-001 on or before December 31,
2014, directing physical connection between the ERCOT and SERC
regions under Sections 210, 211, and 212 of the Federal Power Act (16
U.S.C. Sections 824i, 824j, and 824k). In approving the application,
the commission may prescribe reasonable conditions to protect the
public interest that are consistent with the final order of the
Federal Energy Regulatory Commission.
(c-3) Nothing in Subsection (c-1) or (c-2) is intended to
restrict the authority of the commission or the independent
organization certified under Section 39.151 for the ERCOT power
region to adopt rules or protocols of general applicability.
(d) Repealed by Acts 2019, 86th Leg., R.S., Ch. 44 (S.B. 1938
), Sec. 8, eff. May 16, 2019.
(e) Repealed by Acts 2019, 86th Leg., R.S., Ch. 44 (S.B. 1938
), Sec. 8, eff. May 16, 2019.
(f) Repealed by Acts 2019, 86th Leg., R.S., Ch. 44 (S.B. 1938
), Sec. 8, eff. May 16, 2019.
(g) A municipally owned utility or a municipal power agency
created under Chapter 163 may not directly or indirectly construct,
install, or extend a transmission facility outside of 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 consist of the municipal boundaries of the
participating public entities, unless the municipally owned utility

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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.
(i) The commission, not later than the 185th day after the date
the application is filed, shall approve an application filed under
Subsection (g) for a facility that is to be constructed under an
interconnection agreement appended to an offer of settlement approved
in a final order of the Federal Energy Regulatory Commission that was
issued in Docket No. TX11-01-001 on or before December 31, 2014,
directing physical connection between the ERCOT and SERC regions
under Sections 210, 211, and 212 of the Federal Power Act (16 U.S.C.
Sections 824i, 824j, and 824k). In approving the application, the
commission may prescribe reasonable conditions to protect the public
interest that are consistent with the final order of the Federal
Energy Regulatory Commission.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 405, Sec. 30, eff. Sept. 1, 1999.
Amended by:
Acts 2009, 81st Leg., R.S., Ch. 1170 (H.B. 3309), Sec. 2, eff.
June 19, 2009.
Acts 2015, 84th Leg., R.S., Ch. 1162 (S.B. 776), Sec. 1, eff.

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September 1, 2015.
Acts 2015, 84th Leg., R.S., Ch. 1275 (S.B. 933), Sec. 1, eff.
September 1, 2015.
Acts 2019, 86th Leg., R.S., Ch. 44 (S.B. 1938), Sec. 1, eff. May
16, 2019.
Acts 2019, 86th Leg., R.S., Ch. 44 (S.B. 1938), Sec. 8, eff. May
16, 2019.

Sec. 37.052. EXCEPTIONS TO CERTIFICATE REQUIREMENT FOR SERVICE

EXTENSION. (a) An electric utility is not required to obtain a
certificate for an:
(1) extension into territory that is:
(A) contiguous to the territory the electric utility
serves;
(B) not receiving similar service from another electric
utility; and
(C) not in another electric utility's certificated
area;
(2) extension in or to territory the utility serves or is
authorized to serve under a certificate; or
(3) operation, extension, or service in progress on
September 1, 1975.
(b) An extension allowed under Subsection (a) is limited to a
device used:
(1) to interconnect existing facilities; or
(2) solely to transmit electric utility services from an
existing facility to a customer of retail electric utility service.
(c) An electric utility is not required to amend the utility's
certificate of public convenience and necessity to construct a
transmission line that connects the utility's existing transmission
facilities to a substation or metering point if:
(1) the transmission line does not exceed:
(A) three miles in length, if the line connects to a
load-serving substation or metering point; or
(B) two miles in length, if the line connects to a
generation substation or metering point;
(2) each landowner whose property would be directly
affected by the transmission line, as provided by commission rules,
provides written consent for the transmission line; and

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(3) all rights-of-way necessary for construction of the

transmission line have been purchased.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2021, 87th Leg., R.S., Ch. 876 (S.B. 1281), Sec. 1, eff.
September 1, 2021.

Sec. 37.0521. EXCEPTION FOR RETAIL SALES BY CERTAIN QUALIFYING

COGENERATORS. (a) Notwithstanding Section 37.001(3), a qualifying
cogenerator may sell electric energy at retail to more than one
purchaser of the cogenerator's thermal output.
(b) Selling electric energy at retail to more than one
purchaser does not, as a result of that sale, subject a qualifying
cogenerator to regulation as:
(1) a retail electric provider or power generation company;
or
(2) a retail electric utility under Chapter 37.
(c) This section does not apply to sales in an area:
(1) in which customer choice has not been adopted and where
a municipally owned utility or an electric cooperative is
certificated to provide retail electric utility service; or
(2) that is served by an electric utility that operates
solely outside of ERCOT.

Added by Acts 2013, 83rd Leg., R.S., Ch. 979 (H.B. 2049), Sec. 2, eff.
September 1, 2013.

Sec. 37.053. APPLICATION FOR CERTIFICATE. (a) An electric

utility that wants to obtain or amend a certificate must submit an
application to the commission.
(b) The applicant shall file with the commission evidence the
commission requires to show the applicant has received the consent,
franchise, or permit required by the proper municipal or other public
authority.
(c) The commission may not require the applicant to designate a
preferred route for a proposed transmission line facility.
(d) For transmission facilities ordered or approved by the
commission under Chapter 37 or 39, the rights extended to an electric

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corporation under Section 181.004 include all public land, except

land owned by the state, on which the commission has approved the
construction of the line. This subsection does not limit a
municipality's rights or an electric utility's obligations under
Chapter 33. Nothing in this subsection shall be interpreted to
prevent a public entity from expressing a route preference in a
proceeding under this chapter.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2009, 81st Leg., R.S., Ch. 1170 (H.B. 3309), Sec. 3, eff.
June 19, 2009.
Acts 2011, 82nd Leg., R.S., Ch. 949 (H.B. 971), Sec. 1, eff. June
17, 2011.
Acts 2019, 86th Leg., R.S., Ch. 44 (S.B. 1938), Sec. 2, eff. May
16, 2019.

Sec. 37.054. NOTICE AND HEARING ON APPLICATION. (a) When an

application for a certificate is filed, the commission shall:
(1) give notice of the application to interested parties
and to the office; and
(2) if requested:
(A) set a time and place for a hearing; and
(B) give notice of the hearing.
(b) A person or electric cooperative interested in the
application may intervene at the hearing.
(c) In addition to any notice provided under Subsection (a),
the commission shall require the applicant to provide written notice
of each substation proposed to be authorized by a certificate of
convenience and necessity to each owner of:
(1) property adjacent to the property on which the
substation will be located; and
(2) property located directly across a highway, road, or
street that is adjacent to the property on which the substation will
be located.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 405, Sec. 31, eff. Sept. 1, 1999.
Amended by:
Acts 2011, 82nd Leg., R.S., Ch. 416 (S.B. 855), Sec. 2, eff. June

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 UTILITIES CODE

17, 2011.
Acts 2023, 88th Leg., R.S., Ch. 1053 (S.B. 365), Sec. 1, eff.
September 1, 2023.

Sec. 37.0541. CONSOLIDATION OF CERTAIN PROCEEDINGS. The

commission shall consolidate the proceeding on an application to
obtain or amend a certificate of convenience and necessity for the
construction of a transmission line with the proceeding on another
application to obtain or amend a certificate of convenience and
necessity for the construction of a transmission line if it is
apparent from the applications or a motion to intervene in either
proceeding that the transmission lines that are the subject of the
separate proceedings share a common point of interconnection.

Added by Acts 2009, 81st Leg., R.S., Ch. 1170 (H.B. 3309), Sec. 1,
eff. June 19, 2009.
Amended by:
Acts 2023, 88th Leg., R.S., Ch. 410 (H.B. 1500), Sec. 11, eff.
September 1, 2023.

Sec. 37.055. REQUEST FOR PRELIMINARY ORDER. (a) An electric

utility that wants to exercise a right or privilege under a franchise
or permit that the utility anticipates obtaining but has not been
granted may apply to the commission for a preliminary order under
this section.
(b) The commission may issue a preliminary order declaring that
the commission, on application and under commission rules, will grant
the requested certificate on terms the commission designates, after
the electric utility obtains the franchise or permit.
(c) The commission shall grant the certificate on presentation
of evidence satisfactory to the commission that the electric utility
has obtained the franchise or permit.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2009, 81st Leg., R.S., Ch. 1170 (H.B. 3309), Sec. 4, eff.
June 19, 2009.
Acts 2019, 86th Leg., R.S., Ch. 44 (S.B. 1938), Sec. 3, eff. May
16, 2019.

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Sec. 37.056. GRANT OR DENIAL OF CERTIFICATE. (a) The

commission may approve an application and grant a certificate only if
the commission finds that the certificate is necessary for the
service, accommodation, convenience, or safety of the public.
(b) The commission may:
(1) grant the certificate as requested;
(2) grant the certificate for the construction of a portion
of the requested system, facility, or extension or the partial
exercise of the requested right or privilege; or
(3) refuse to grant the certificate.
(c) The commission shall grant each certificate on a
nondiscriminatory basis after considering:
(1) the adequacy of existing service;
(2) the need for additional service;
(3) the effect of granting the certificate on the recipient
of the certificate and any electric utility serving the proximate
area; and
(4) other factors, such as:
(A) community values;
(B) recreational and park areas;
(C) historical and aesthetic values;
(D) environmental integrity;
(E) the probable improvement of service or lowering of
cost to consumers in the area if the certificate is granted,
including any potential economic or reliability benefits associated
with dual fuel and fuel storage capabilities in areas outside the
ERCOT power region; and
(F) the need for extending transmission service where
existing or projected electrical loads will be underserved, including
where:
(i) the existing transmission service is
unreasonably remote;
(ii) the available capacity is unreasonably limited
at transmission or distribution voltage level; or
(iii) the electrical load cannot be interconnected
in a timely manner.
(c-1) In considering the need for additional service under
Subsection (c)(2) for a reliability transmission project that serves

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the ERCOT power region or under Subsection (c)(4)(F), the commission

must consider the historical load, forecasted load growth, and
additional load currently seeking interconnection, including load for
which the electric utility has yet to sign an interconnection
agreement, as determined by the electric utility with the
responsibility for serving the load.
(d) The commission by rule shall establish criteria, in
addition to the criteria described by Subsection (c), for granting a
certificate for a transmission project that serves the ERCOT power
region and that is not necessary to meet state or federal reliability
standards. The criteria must include a comparison of the estimated
cost of the transmission project for consumers and the estimated
congestion cost savings for consumers that may result from the
transmission project, considering both current and future expected
congestion levels and the transmission project's ability to reduce
those congestion levels. The commission shall include with its
decision on an application for a certificate to which this subsection
applies findings on the criteria.
(e) A certificate to build, own, or operate a new transmission
facility that directly interconnects with an existing electric
utility facility or municipally owned utility facility may be granted
only to the owner of that existing facility. If a new transmission
facility will directly interconnect with facilities owned by
different electric utilities or municipally owned utilities, each
entity shall be certificated to build, own, or operate the new
facility in separate and discrete equal parts unless they agree
otherwise.
(f) Notwithstanding Subsection (e), if a new transmission line,
whether single or double circuit, will create the first
interconnection between a load-serving station and an existing
transmission facility, the entity with a load-serving responsibility
or an electric cooperative that has a member with a load-serving
responsibility at the load-serving station shall be certificated to
build, own, or operate the new transmission line and the load-serving
station. The owner of the existing transmission facility shall be
certificated to build, own, or operate the station or tap at the
existing transmission facility to provide the interconnection, unless
after a reasonable period of time the owner of the existing
transmission facility is unwilling to build, and then the entity with
the load-serving responsibility or an electric cooperative that has a

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member with a load-serving responsibility may be certificated to

build the interconnection facility.
(g) Notwithstanding any other provision of this section, an
electric utility or municipally owned utility that is authorized to
build, own, or operate a new transmission facility under Subsection
(e) or (f) may designate another electric utility that is currently
certificated by the commission within the same electric power region,
coordinating council, independent system operator, or power pool or a
municipally owned utility to build, own, or operate a portion or all
of such new transmission facility, subject to any requirements
adopted by the commission by rule.
(h) The division of any required certification of facilities
described in this section shall apply unless each entity agrees
otherwise. Nothing in this section is intended to require a
certificate for facilities that the commission has determined by rule
do not require certification to build, own, or operate.
(i) Notwithstanding any other provision of this section, an
electric cooperative may be certificated to build, own, or operate a
new facility in place of any other electric cooperative if both
cooperatives agree.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 2003, 78th Leg., ch. 295, Sec. 2, eff. June 18, 2003.
Amended by:
Acts 2011, 82nd Leg., R.S., Ch. 949 (H.B. 971), Sec. 2(a), eff.
June 17, 2011.
Acts 2019, 86th Leg., R.S., Ch. 44 (S.B. 1938), Sec. 4, eff. May
16, 2019.
Acts 2021, 87th Leg., R.S., Ch. 198 (H.B. 1510), Sec. 3, eff.
June 1, 2021.
Acts 2021, 87th Leg., R.S., Ch. 876 (S.B. 1281), Sec. 2, eff.
September 1, 2021.
Acts 2023, 88th Leg., R.S., Ch. 410 (H.B. 1500), Sec. 12, eff.
September 1, 2023.
Acts 2023, 88th Leg., R.S., Ch. 892 (H.B. 5066), Sec. 1, eff.
June 13, 2023.

Sec. 37.057. DEADLINE FOR APPLICATION FOR NEW TRANSMISSION

FACILITY. The commission must approve or deny an application for a

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certificate for a new transmission facility not later than the 180th
day after the date the application is filed. If the commission does
not approve or deny the application on or before that date, a party
may seek a writ of mandamus in a district court of Travis County to
compel the commission to decide on the application.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2009, 81st Leg., R.S., Ch. 1170 (H.B. 3309), Sec. 4, eff.
June 19, 2009.
Acts 2019, 86th Leg., R.S., Ch. 44 (S.B. 1938), Sec. 5, eff. May
16, 2019.
Acts 2023, 88th Leg., R.S., Ch. 348 (S.B. 1076), Sec. 1, eff.
June 2, 2023.
Acts 2023, 88th Leg., R.S., Ch. 892 (H.B. 5066), Sec. 2, eff.
June 13, 2023.

Sec. 37.058. CERTIFICATE AND DETERMINATION ISSUED TO CERTAIN

NON-ERCOT UTILITIES FOR GENERATING FACILITY. (a) This section applies
only to an electric utility that operates solely outside of ERCOT.
(b) An electric utility may file with the commission a request
that the commission:
(1) grant a certificate for an electric generating
facility;
(2) make a public interest determination for the purchase
of an existing electric generating facility under Section 14.101; or
(3) both grant a certificate and make a determination.
(c) Notwithstanding any other law, in a proceeding involving
the purchase of an existing electric generating facility, the
commission shall issue a final order on a certificate for the
facility or making a determination on the facility required by
Section 14.101, as applicable, not later than the 181st day after the
date a request for the certificate or determination is filed with the
commission under Subsection (b). For generating facilities granted a
certificate under this subsection, notwithstanding Section 36.053,
the utility's recoverable invested capital included in rates shall be
determined by the commission.
(d) Notwithstanding any other law, in a proceeding involving a
newly constructed generating facility, the commission shall issue a

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final order on a certificate for the facility not later than the
366th day after the date a request for the certificate is filed with
the commission under Subsection (b).
(e) Notwithstanding any other provision of this title, an
electric utility operating solely outside of the ERCOT power region
may, but shall not be required to, obtain a certificate to install,
own, or operate a generation facility with a capacity of 10 megawatts
or less.

Added by Acts 2015, 84th Leg., R.S., Ch. 733 (H.B. 1535), Sec. 4, eff.
June 17, 2015.
Amended by:
Acts 2021, 87th Leg., R.S., Ch. 198 (H.B. 1510), Sec. 4, eff.
June 1, 2021.

Sec. 37.059. REVOCATION OR AMENDMENT OF CERTIFICATE. (a) The

commission may revoke or amend a certificate after notice and hearing
if the commission finds that the certificate holder has never
provided or is no longer providing service in all or any part of the
certificated area.
(b) The commission may require one or more electric utilities
to provide service in an area affected by the revocation or amendment
of a certificate.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 37.060. DIVISION OF MULTIPLY CERTIFICATED SERVICE AREAS.

(a) This subsection and Subsections (b)-(g) apply only to areas in
which each retail electric utility that is authorized to provide
retail electric utility service to the area is providing customer
choice. For purposes of this subsection, an electric cooperative or
a municipally owned electric utility shall be deemed to be providing
customer choice if it has approved a resolution adopting customer
choice that is effective on January 1, 2002, or effective within 24
months after the date of the resolution adopting customer choice.
All other retail electric utilities shall be deemed to be providing
customer choice if customer choice will be allowed for customers of
the retail electric utility on January 1, 2002. In areas in which
each certificated retail electric utility is providing customer

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choice, the commission, if requested by a retail electric utility,

shall examine all areas within the service area of the retail
electric utility making the request that are also certificated to one
or more other retail electric utilities and, after notice and
hearing, shall amend the retail electric utilities' certificates so
that only one retail electric utility is certificated to provide
distribution services in any such area. Only retail electric
utilities certificated to serve an area on June 1, 1999, may continue
to serve the area or portion of the area under an amended certificate
issued under this subsection.
(b) This section does not apply in any area in which a
municipally owned utility is certificated to provide retail electric
utility service if the municipally owned utility serving the area
files with the commission by October 1, 2001, a request that areas
within the certificated service area of the municipally owned utility
remain as presently certificated.
(c) The commission shall enter its order dividing multiply
certificated areas within one year of the date a request is received.
(d) In amending certificates under this section, the commission
shall take into consideration the factors prescribed by Section
37.056.
(e) Notwithstanding Section 37.059, the commission shall revoke
certificates to the extent necessary to achieve the division of
retail electric service areas as provided by this section.
(f) Unless otherwise agreed by the affected retail electric
utilities, each retail electric utility shall be allowed to continue
to provide service to the location of electricity-consuming
facilities it is serving on the date an application for division of
the affected multiply certificated service areas is filed. No
customer located within the affected multiply certificated service
areas shall be permitted to switch from one retail electric utility
to another while an application for division of the affected multiply
certificated service areas is pending.
(g) If on June 1, 1999, retail service is being provided in an
area by another retail electric utility with the written consent of
the retail electric utility certificated to serve the area, that
consent shall be filed with the commission. On notification of that
consent and a request by an affected retail electric utility to amend
the relevant certificates, the commission may grant an exception or
amend a retail electric utility's certificate. This provision shall

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not be construed to limit the commission's authority to grant

exceptions or to amend a retail electric utility's certificate, upon
request and notification, for areas to which retail service is being
provided pursuant to written consent granted after June 1, 1999.
(h) The commission may not grant an additional retail electric
utility certificate to serve an area if the effect of the grant would
cause the area to be multiply certificated unless the commission
finds that the certificate holders are not providing service to any
part of the area for which a certificate is sought and are not
capable of providing adequate service to the area in accordance with
applicable standards. However, neither this subsection nor the
deadline of June 1, 1999, provided by Subsection (a) shall apply to
any application for multiple certification filed with the commission
on or before February 1, 1999, and those applications may be
processed in accordance with applicable law in effect on the date the
application was filed. Applications for multiple certification filed
with the commission on or before February 1, 1999, may not be amended
to expand the area for which a certificate is sought except for
contiguous areas within municipalities that provide consent, as
required by Section 37.053(b), not later than June 1, 1999.
(i) Notwithstanding any other provision of this section, if
requested by a municipally owned utility, the commission shall
examine all areas within the municipally owned utility's service area
that are also certificated to one or more other retail electric
utilities and, after notice and hearing, may amend the retail
electric utilities' certificates so that only one retail electric
utility is certificated to provide distribution services in the area,
provided that:
(1) the application is filed with the commission within 12
months of the effective date of this provision and is limited to
single certification of the area within the municipality's boundaries
as of February 1, 1999;
(2) the commission preserves the right of an electric
utility or an electric cooperative to serve its existing customers,
including any property owned or leased by any customer; and
(3) the municipality is a member city of a municipal power
agency, as that term is used in Section 40.059.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 32, eff. Sept. 1, 1999.
Amended by Acts 2001, 77th Leg., ch. 796, Sec. 1, eff. June 14, 2001.

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Sec. 37.061. EXISTING SERVICE AREA AGREEMENTS. (a)

Notwithstanding any other provision of this title, the commission
shall allow a municipally owned utility to amend the service area
boundaries of its certificate if:
(1) the municipally owned utility was the holder of a
certificate as of January 1, 1999;
(2) the municipally owned utility has an agreement existing
before January 1, 1999, with a public utility serving the area that
the public utility will not contest an application to amend the
certificate to add municipal territory; and
(3) the area for which a certificate is requested is not
certificated to a retail electric utility that is not a party to the
agreement and that has not consented in writing to certification of
the area to the municipality.
(b) The commission may not amend the certificate of the public
utility serving the affected area based on the granting of a
certificate to the municipally owned utility.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 32, eff. Sept. 1, 1999.

SUBCHAPTER C. MUNICIPALITIES
Sec. 37.101. SERVICE IN ANNEXED OR INCORPORATED AREA. (a) If
an area is or will be included within a municipality as the result of
annexation, incorporation, or another reason, each electric utility
and each electric cooperative that holds or is entitled to hold a
certificate under this title to provide service or operate a facility
in the area before the inclusion has the right to continue to provide
the service or operate the facility and extend service within the
utility's or cooperative's certificated area in the annexed or
incorporated area under the rights granted by the certificate and
this title.
(b) Notwithstanding any other law, an electric utility has the
right to:
(1) continue and extend service within the utility's
certificated area; and
(2) use roads, streets, highways, alleys, and public
property to furnish retail electric utility service.

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 UTILITIES CODE

(c) The governing body of a municipality may require an

electric utility to relocate the utility's facility at the utility's
expense to permit the widening or straightening of a street by:
(1) giving the electric utility 30 days' notice; and
(2) specifying the new location for the facility along the
right-of-way of the street.
(d) This section does not:
(1) limit the power of a city, town, or village to
incorporate or of a municipality to extend its boundaries by
annexation; or
(2) prohibit a municipality from levying a tax or other
special charge for the use of the streets as authorized by Section
182.025, Tax Code.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 405, Sec. 33, eff. Sept. 1, 1999.

Sec. 37.102. GRANT OF CERTIFICATE FOR CERTAIN MUNICIPALITIES.

(a) If a municipal corporation offers retail electric utility
service in a municipality having a population of more than 151,000
that is located in a county having a population of more than 2.5
million, the commission shall singly certificate areas in the
municipality's boundaries in which more than one electric utility
provides electric utility service.
(b) In singly certificating an area under Subsection (a), the
commission shall preserve the right of an electric utility to serve
the customers the electric utility was serving on June 17, 1983.
This subsection does not apply to a customer at least partially
served by a nominal 69,000 volts system who gave notice of
termination to the utility servicing that customer before June 17,
1983.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2011, 82nd Leg., R.S., Ch. 1163 (H.B. 2702), Sec. 179, eff.
September 1, 2011.
Acts 2023, 88th Leg., R.S., Ch. 644 (H.B. 4559), Sec. 272, eff.
September 1, 2023.

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SUBCHAPTER D. REGULATION OF SERVICES, AREAS, AND FACILITIES

Sec. 37.151. PROVISION OF SERVICE. Except as provided by
Sections 37.152 and 37.153, a certificate holder shall:
(1) serve every consumer in the utility's certificated
area; and
(2) provide continuous and adequate service in that area.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2009, 81st Leg., R.S., Ch. 1170 (H.B. 3309), Sec. 4, eff.
June 19, 2009.
Acts 2019, 86th Leg., R.S., Ch. 44 (S.B. 1938), Sec. 6, eff. May
16, 2019.

Sec. 37.152. GROUNDS FOR REDUCTION OF SERVICE. (a) Unless the

commission issues a certificate that the present and future
convenience and necessity will not be adversely affected, a
certificate holder may not discontinue, reduce, or impair service to
any part of the holder's certificated service area except for:
(1) nonpayment of charges;
(2) nonuse; or
(3) another similar reason that occurs in the usual course
of business.
(b) A discontinuance, reduction, or impairment of service must
be in compliance with and subject to any condition or restriction the
commission prescribes.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 37.153. REQUIRED REFUSAL OF SERVICE. A certificate holder

shall refuse to serve a customer in the holder's certificated area if
the holder is prohibited from providing the service under Section
212.012, 232.029, or 232.0291, Local Government Code.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2005, 79th Leg., Ch. 708 (S.B. 425), Sec. 13, eff. September
1, 2005.

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Sec. 37.154. TRANSFER OF CERTIFICATE. (a) An electric utility

or municipally owned utility may sell, assign, or lease a certificate
or a right obtained under a certificate if the purchaser, assignee,
or lessee is already certificated by the commission to provide
electric service within the same electric power region, coordinating
council, independent system operator, or power pool, or if the
purchaser, assignee, or lessee is an electric cooperative or
municipally owned utility. As part of a transaction subject to
Sections 39.262(l)-(o) and 39.915, the commission may approve a sale,
assignment, or lease to an entity that has not been previously
certificated if the approval will not diminish the retail rate
jurisdiction of this state. Any purchase, assignment, or lease under
this section requires that the commission determine that the
purchaser, assignee, or lessee can provide adequate service.
(b) A sale, assignment, or lease of a certificate or a right is
subject to conditions the commission prescribes.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2019, 86th Leg., R.S., Ch. 44 (S.B. 1938), Sec. 7, eff. May
16, 2019.

Sec. 37.155. APPLICATION OF CONTRACTS. A contract approved by

the commission between retail electric utilities that designates
areas and customers to be served by the utilities:
(1) is valid and enforceable; and
(2) shall be incorporated into the appropriate areas of
certification.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 37.156. INTERFERENCE WITH ANOTHER UTILITY. If an electric

utility constructing or extending the utility's lines, plant, or
system interferes or attempts to interfere with the operation of a
line, plant, or system of another utility, the commission by order
may:
(1) prohibit the construction or extension; or
(2) prescribe terms for locating the affected lines,
plants, or systems.

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Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 37.157. MAPS. (a) An electric utility shall file with

the commission one or more maps that show each utility facility and
that separately illustrate each utility facility for the generation,
transmission, or distribution of the utility's services on a date the
commission orders.
(b) Each electric utility, transmission and distribution
utility, electric cooperative, and municipally owned utility shall
provide the utility's service area boundary map, using good faith
efforts, in a geographic information system format to the commission.
The service area boundary map may be provided to the commission in a
geodatabase feature class or shapefile.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2023, 88th Leg., R.S., Ch. 85 (S.B. 1093), Sec. 1, eff. May
19, 2023.

CHAPTER 38. REGULATION OF ELECTRIC SERVICES

SUBCHAPTER A. STANDARDS
Sec. 38.001. GENERAL STANDARD. An electric utility and an
electric cooperative shall furnish service, instrumentalities, and
facilities that are safe, adequate, efficient, and reasonable.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 405, Sec. 34, eff. Sept. 1, 1999.

Sec. 38.002. AUTHORITY OF REGULATORY AUTHORITY CONCERNING

STANDARDS. A regulatory authority, on its own motion or on complaint
and after reasonable notice and hearing, may:
(1) adopt just and reasonable standards, classifications,
rules, or practices an electric utility must follow in furnishing a
service;
(2) adopt adequate and reasonable standards for measuring a
condition, including quantity, quality, pressure, and initial
voltage, relating to the furnishing of a service;
(3) adopt reasonable rules for examining, testing, and

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measuring a service; and

(4) adopt or approve reasonable rules, specifications, and
standards to ensure the accuracy of equipment, including meters and
instruments, used to measure a service.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 38.003. RULE OR STANDARD. (a) An electric utility may

not impose a rule except as provided by this title.
(b) An electric utility may file with the regulatory authority
a standard, classification, rule, or practice the utility follows.
(c) The standard, classification, rule, or practice continues
in force until:
(1) amended by the utility; or
(2) changed by the regulatory authority as provided by this
title.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 38.004. MINIMUM CLEARANCE STANDARD. (a) Notwithstanding

any other law, a transmission or distribution line owned by an
electric utility or an electric cooperative must be constructed,
operated, and maintained, as to clearances, in the manner described
by the National Electrical Safety Code Standard ANSI (c)(2), as
adopted by the American National Safety Institute and in effect at
the time of construction.
(b) An electric utility, municipally owned utility, or electric
cooperative shall meet the minimum clearance requirements specified
in Rule 232 of the National Electrical Safety Code Standard ANSI
(c)(2) in the construction of any transmission or distribution line
over the following lakes:
(1) Abilene;
(2) Alan Henry;
(3) Alvarado Park;
(4) Amistad;
(5) Amon G. Carter;
(6) Aquilla;
(7) Arlington;
(8) Arrowhead;

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(9) Athens;
(10) Austin;
(11) Averhoff;
(12) B. A. Steinhagen;
(13) Bachman;
(14) Balmorhea;
(15) Bardwell;
(16) Bastrop;
(17) Baylor Creek;
(18) Belton;
(19) Benbrook;
(20) Big Creek;
(21) Bob Sandlin;
(22) Bonham;
(23) Bonham State Park;
(24) Brady Creek;
(25) Brandy Branch;
(26) Braunig;
(27) Brazos;
(28) Bridgeport;
(29) Brownwood;
(30) Bryan;
(31) Bryson;
(32) Buchanan;
(33) Buffalo Creek;
(34) Buffalo Springs;
(35) Caddo;
(36) Calaveras;
(37) Canyon;
(38) Casa Blanca;
(39) Cedar Creek;
(40) Champion Creek;
(41) Choke Canyon;
(42) Cisco;
(43) Cleburne State Park;
(44) Clyde;
(45) Coffee Mill;
(46) Coleman;
(47) Coleto Creek;
(48) Colorado City;

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(49) Conroe;
(50) Cooper;
(51) Corpus Christi;
(52) Crook;
(53) Cypress Springs;
(54) Daniel;
(55) Davy Crockett;
(56) Diversion;
(57) Dunlap;
(58) Eagle Mountain;
(59) E. V. Spence;
(60) Fairfield;
(61) Falcon;
(62) Fayette County;
(63) Findley;
(64) Fork;
(65) Fort Parker State Park;
(66) Fort Phantom Hill;
(67) Fryer;
(68) Georgetown;
(69) Gibbons Creek;
(70) Gilmer;
(71) Gladewater;
(72) Gonzales;
(73) Graham;
(74) Granbury;
(75) Granger;
(76) Grapevine;
(77) Greenbelt;
(78) Halbert;
(79) Hawkins;
(80) Holbrook;
(81) Hords Creek;
(82) Houston;
(83) Houston County;
(84) Hubbard Creek;
(85) Inks;
(86) Jacksboro;
(87) Jacksonville;
(88) J. B. Thomas;

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(89) Joe Pool;

(90) Kemp;
(91) Kickapoo;
(92) Kirby;
(93) Kurth;
(94) Lady Bird;
(95) Lake O' The Pines;
(96) Lavon;
(97) Leon;
(98) Lewisville;
(99) Limestone;
(100) Livingston;
(101) Lone Star;
(102) Lost Creek;
(103) Lyndon B. Johnson;
(104) Mackenzie;
(105) Marble Falls;
(106) Marine Creek;
(107) Martin Creek;
(108) McClellan;
(109) Medina;
(110) Meredith;
(111) Meridian State Park;
(112) Mexia;
(113) Mill Creek;
(114) Millers Creek;
(115) Mineral Wells;
(116) Monticello;
(117) Moss;
(118) Mountain Creek;
(119) Muenster;
(120) Murvaul;
(121) Nacogdoches;
(122) Naconiche;
(123) Nasworthy;
(124) Navarro Mills;
(125) New Ballinger;
(126) Nocona;
(127) Oak Creek;
(128) O. C. Fisher;

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(129) O. H. Ivie;
(130) Palestine;
(131) Palo Duro;
(132) Palo Pinto;
(133) Pat Cleburne;
(134) Pat Mayse;
(135) Pinkston;
(136) Placid;
(137) Possum Kingdom;
(138) Proctor;
(139) Purtis Creek;
(140) Quitman;
(141) Raven;
(142) Ray Hubbard;
(143) Ray Roberts;
(144) Red Bluff;
(145) Richland-Chambers;
(146) Sam Rayburn;
(147) Sheldon;
(148) Somerville;
(149) Squaw Creek;
(150) Stamford;
(151) Stillhouse Hollow;
(152) Striker;
(153) Sulphur Springs;
(154) Sweetwater;
(155) Tawakoni;
(156) Texana;
(157) Texoma;
(158) Timpson;
(159) Toledo Bend;
(160) Tradinghouse Creek;
(161) Travis;
(162) Twin Buttes;
(163) Tyler;
(164) Waco;
(165) Walter E. Long;
(166) Waxahachie;
(167) Weatherford;
(168) Welsh;

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(169) Wheeler Branch;

(170) White River;
(171) White Rock;
(172) Whitney;
(173) Wichita;
(174) Winnsboro;
(175) Winters-Elm Creek;
(176) Wood;
(177) Worth; and
(178) Wright Patman.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 405, Sec. 35, eff. Sept. 1, 1999.
Amended by:
Acts 2019, 86th Leg., R.S., Ch. 1320 (H.B. 4150), Sec. 4, eff.
September 1, 2019.

Sec. 38.005. ELECTRIC SERVICE RELIABILITY MEASURES. (a) The

commission shall implement service quality and reliability standards
relating to the delivery of electricity to retail customers by
electric utilities and transmission and distribution utilities. The
commission by rule shall develop reliability standards, including:
(1) the system-average interruption frequency index
(SAIFI);
(2) the system-average interruption duration index (SAIDI);
(3) achievement of average response time for customer
service requests or inquiries; or
(4) other standards that the commission finds reasonable
and appropriate.
(b) The commission may take appropriate enforcement action
under this section, including action against a utility, if any of the
utility's feeders with 10 or more customers has had a SAIDI or SAIFI
average that is more than 300 percent greater than the system average
of all feeders during any two-year period, beginning in the year
2000. In determining the appropriate enforcement action, the
commission shall consider:
(1) the feeder's operating and maintenance history;
(2) the cause of each interruption in the feeder's service;
(3) any action taken by a utility to address the feeder's

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performance;
(4) the estimated cost and benefit of remediating a
feeder's performance; and
(5) any other relevant factor as determined by the
commission.
(c) The standards implemented under Subsection (a) shall
require each electric utility and transmission and distribution
utility subject to this section to maintain adequately trained and
experienced personnel throughout the utility's service area so that
the utility is able to fully and adequately comply with the
appropriate service quality and reliability standards.
(d) The standards shall ensure that electric utilities do not
neglect any local neighborhood or geographic area, including rural
areas, communities of less than 1,000 persons, and low-income areas,
with regard to system reliability.
(e) The commission may require each electric utility and
transmission and distribution utility to supply data to assist the
commission in developing the reliability standards.
(f) Each electric utility, transmission and distribution
utility, electric cooperative, municipally owned utility, and
generation provider shall be obligated to comply with any operational
criteria duly established by the independent organization as defined
by Section 39.151 or adopted by the commission.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 36, eff. Sept. 1, 1999.
Amended by:
Acts 2009, 81st Leg., R.S., Ch. 424 (H.B. 2052), Sec. 1, eff.
June 19, 2009.

SUBCHAPTER B. PROHIBITIONS ON PREFERENCES AND DISCRIMINATION

Sec. 38.021. UNREASONABLE PREFERENCE OR PREJUDICE CONCERNING
SERVICE PROHIBITED. In providing a service to persons in a
classification, an electric utility may not:
(1) grant an unreasonable preference or advantage to a
person in the classification; or
(2) subject a person in the classification to an
unreasonable prejudice or disadvantage.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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Sec. 38.022. DISCRIMINATION AND RESTRICTION ON COMPETITION. An

electric utility may not:
(1) discriminate against a person or electric cooperative
who sells or leases equipment or performs services in competition
with the electric utility; or
(2) engage in a practice that tends to restrict or impair
that competition.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 405, Sec. 37, eff. Sept. 1, 1999.

SUBCHAPTER C. EXAMINATIONS, TESTS, AND INSPECTIONS

Sec. 38.051. EXAMINATION AND TEST OF INSTRUMENT OR EQUIPMENT;
INSPECTION. (a) A regulatory authority may:
(1) examine and test equipment, including meters and
instruments, used to measure service of an electric utility; and
(2) set up and use on the premises occupied by an electric
utility an apparatus or appliance necessary for the examination or
test.
(b) The electric utility is entitled to be represented at an
examination, test, or inspection made under this section.
(c) The electric utility and its officers and employees shall
facilitate the examination, test, or inspection by giving reasonable
aid to the regulatory authority and to any person designated by the
regulatory authority for the performance of those duties.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 38.052. INSPECTION FOR CONSUMER. (a) A consumer may have

a meter or other measuring device tested by an electric utility:
(1) once without charge, after a reasonable period of
presumed accuracy the regulatory authority establishes by rule; and
(2) at a shorter interval on payment of a reasonable fee
established by the regulatory authority.
(b) The regulatory authority shall establish reasonable fees to
be paid for other examining or testing of a measuring device on the
request of a consumer.
(c) If the consumer requests the test under Subsection (a)(2)
and the measuring device is found unreasonably defective or incorrect

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to the substantial disadvantage of the consumer, the fee the consumer

paid at the time of the request shall be refunded.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER D. IMPROVEMENTS IN SERVICE

Sec. 38.071. IMPROVEMENTS IN SERVICE; INTERCONNECTING SERVICE.
The commission, after notice and hearing, may:
(1) order an electric utility to provide specified
improvements in its service in a specified area if:
(A) service in the area is inadequate or substantially
inferior to service in a comparable area; and
(B) requiring the company to provide the improved
service is reasonable; or
(2) order two or more electric utilities or electric
cooperatives to establish specified facilities for interconnecting
service.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 405, Sec. 38, eff. Sept. 1, 1999.

Sec. 38.072. PRIORITIES FOR POWER RESTORATION TO CERTAIN

MEDICAL FACILITIES. (a) In this section:
(1) "Assisted living facility" has the meaning assigned by
Section 247.002, Health and Safety Code.
(2) "End stage renal disease facility" has the meaning
assigned by Section 251.001, Health and Safety Code.
(3) "Extended power outage" has the meaning assigned by
Section 13.1395, Water Code.
(4) "Hospice services" has the meaning assigned by Section
142.001, Health and Safety Code.
(5) "Nursing facility" has the meaning assigned by Section
242.301, Health and Safety Code.
(b) The commission by rule shall require an electric utility to
give to the following the same priority that it gives to a hospital
in the utility's emergency operations plan for restoring power after
an extended power outage:
(1) a nursing facility;
(2) an assisted living facility;

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(3) an end stage renal disease facility; and

(4) a facility that provides hospice services.
(c) The rules adopted by the commission under Subsection (b)
must allow an electric utility to exercise the electric utility's
discretion to prioritize power restoration for a facility after an
extended power outage in accordance with the facility's needs and
with the characteristics of the geographic area in which power must
be restored.
(d) A municipally owned utility shall report the emergency
operations plan for restoring power to a facility listed in
Subsection (b) to the municipality's governing body or the body
vested with the power to manage and operate the municipally owned
utility.
(e) An electric cooperative shall report the emergency
operations plan for restoring power to a facility listed in
Subsection (b) to the board of directors of the electric cooperative.

Added by Acts 2011, 82nd Leg., R.S., Ch. 640 (S.B. 937), Sec. 1, eff.
September 1, 2011.
Amended by:
Acts 2021, 87th Leg., R.S., Ch. 961 (S.B. 1876), Sec. 3, eff.
September 1, 2021.

Sec. 38.073. AUTHORITY OF COMMISSION DURING AN EMERGENCY. (a)

On a declaration of a natural disaster or other emergency by the
governor, the commission may require an electric utility, municipally
owned utility, electric cooperative, qualifying facility, power
generation company, exempt wholesale generator, or power marketer to
sell electricity to an electric utility, municipally owned utility,
or electric cooperative that is unable to supply power to meet
customer demand due to the natural disaster or other emergency. Any
plant, property, equipment, or other items used to receive or deliver
electricity under this subsection are used and useful in delivering
service to the public, and the commission shall allow timely recovery
for the costs of those items. The commission may order an electric
utility, municipally owned utility, or electric cooperative to
provide interconnection service to another electric utility,
municipally owned utility, or electric cooperative to facilitate a
sale of electricity under this section. If the commission does not

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order the sale of electricity during a declared emergency as

described by this subsection, the commission shall promptly submit to
the legislature a report describing the reasons why the commission
did not make that order.
(b) If an entity receives electricity under Subsection (a), the
receiving entity shall reimburse the supplying entity for the actual
cost of providing the electricity. The entity receiving the
electricity is responsible for any transmission and distribution
service charges specifically incurred in relation to providing the
electricity.
(c) An entity that pays for electricity received under
Subsection (b) and that is regulated by the commission may fully
recover the cost of the electricity in a timely manner by:
(1) including the cost in the entity's fuel cost under
Section 36.203; or
(2) notwithstanding Section 36.201, imposing a different
surcharge.

Added by Acts 2009, 81st Leg., R.S., Ch. 1226 (S.B. 1492), Sec. 2,
eff. June 19, 2009.
Added by Acts 2009, 81st Leg., R.S., Ch. 1280 (H.B. 1831), Sec. 2.02,
eff. September 1, 2009.

Sec. 38.074. CRITICAL NATURAL GAS FACILITIES AND ENTITIES. (a)

The commission shall collaborate with the Railroad Commission of
Texas to adopt rules to establish a process to designate certain
natural gas facilities and entities associated with providing natural
gas in this state as critical during energy emergencies.
(b) The rules must:
(1) ensure that the independent organization certified
under Section 39.151 for the ERCOT power region and each electric
utility, municipally owned utility, and electric cooperative
providing service in the ERCOT power region is provided with the
information required by Section 81.073, Natural Resources Code;
(2) provide for prioritizing for load-shed purposes during
an energy emergency the facilities and entities designated under
Subsection (a); and
(3) provide discretion to an electric utility, municipally
owned utility, or electric cooperative providing service in the ERCOT

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power region to prioritize power delivery and power restoration among

the facilities and entities designated under Subsection (a) on the
utility's or cooperative's systems, as circumstances require.

Added by Acts 2021, 87th Leg., R.S., Ch. 426 (S.B. 3), Sec. 16, eff.
June 8, 2021.
Added by Acts 2021, 87th Leg., R.S., Ch. 931 (H.B. 3648), Sec. 2, eff.
June 18, 2021.

Sec. 38.075. WEATHER EMERGENCY PREPAREDNESS. (a) The

commission by rule shall require each electric cooperative,
municipally owned utility, and transmission and distribution utility
providing transmission service in the ERCOT power region to implement
measures to prepare the cooperative's or utility's facilities to
maintain service quality and reliability during a weather emergency
according to standards adopted by the commission. In adopting the
rules, the commission shall take into consideration weather
predictions produced by the office of the state climatologist.
(b) The independent organization certified under Section 39.151
for the ERCOT power region shall:
(1) inspect the facilities of each electric cooperative,
municipally owned utility, and transmission and distribution utility
providing transmission service in the ERCOT power region for
compliance with the reliability standards;
(2) provide the owner of a facility described by
Subdivision (1) with a reasonable period of time in which to remedy
any violation the independent organization discovers in an
inspection; and
(3) report to the commission any violation that is not
remedied in a reasonable period of time.
(c) The independent organization certified under Section 39.151
for the ERCOT power region shall prioritize inspections conducted
under Subsection (b)(1) based on risk level, as determined by the
organization.
(d) The commission shall impose an administrative penalty on an
entity, including a municipally owned utility or an electric
cooperative, that violates a rule adopted under this section and does
not remedy that violation within a reasonable period of time.
(e) Notwithstanding any other provision of this subtitle, the

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commission shall allow a transmission and distribution utility to

design and operate a load management program for nonresidential
customers to be used where the independent organization certified
under Section 39.151 for the ERCOT power region has declared a Level
2 Emergency or a higher level of emergency or has otherwise directed
the transmission and distribution utility to shed load. A
transmission and distribution utility implementing a load management
program under this subsection shall be permitted to recover the
reasonable and necessary costs of the load management program under
Chapter 36. A load management program operated under this subsection
is not considered a competitive service.

Added by Acts 2021, 87th Leg., R.S., Ch. 426 (S.B. 3), Sec. 16, eff.
June 8, 2021.

Sec. 38.076. INVOLUNTARY AND VOLUNTARY LOAD SHEDDING. (a) The

commission by rule shall adopt a system to allocate load shedding
among electric cooperatives, municipally owned utilities, and
transmission and distribution utilities providing transmission
service in the ERCOT power region during an involuntary load shedding
event initiated by the independent organization certified under
Section 39.151 for the region during an energy emergency.
(b) The system must provide for allocation of the load shedding
obligation to each electric cooperative, municipally owned utility,
and transmission and distribution utility in different seasons based
on historical seasonal peak demand in the service territory of the
electric cooperative, municipally owned utility, or transmission and
distribution utility.
(c) The commission by rule shall:
(1) categorize types of critical load that may be given the
highest priority for power restoration; and
(2) require electric cooperatives, municipally owned
utilities, and transmission and distribution utilities providing
transmission service in the ERCOT power region to submit to the
commission and the independent organization certified under Section
39.151 for the region:
(A) customers or circuits the cooperative or utility
has designated as critical load; and
(B) a plan for participating in load shedding in

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response to an involuntary load shedding event described by

Subsection (a).
(d) The commission by rule shall require electric cooperatives
and municipally owned utilities providing transmission service in the
ERCOT power region to:
(1) maintain lists of customers willing to voluntarily
participate in voluntary load reduction; and
(2) coordinate with municipalities, businesses, and
customers that consume large amounts of electricity to encourage
voluntary load reduction.
(e) This section does not abridge, enlarge, or modify the
obligation of an electric cooperative, a municipally owned utility,
or a transmission and distribution utility to comply with federal
reliability standards.
(f) After each load shedding event, the commission may conduct
an examination of the implementation of load shedding, including
whether each electric cooperative, municipally owned utility, and
transmission and distribution utility complied with its plan as filed
with the commission under Subsection (c)(2).

Added by Acts 2021, 87th Leg., R.S., Ch. 426 (S.B. 3), Sec. 16, eff.
June 8, 2021.

Sec. 38.077. LOAD SHEDDING EXERCISES. (a) The commission and

the independent organization certified for the ERCOT power region
shall conduct simulated or tabletop load shedding exercises with
providers of electric generation service and transmission and
distribution service in the ERCOT power region.
(b) The commission shall ensure that each year at least one
simulated or tabletop exercise is conducted during a summer month and
one simulated or tabletop exercise is conducted during a winter
month.

Added by Acts 2021, 87th Leg., R.S., Ch. 426 (S.B. 3), Sec. 16, eff.
June 8, 2021.

Text of section as added by Acts 2023, 88th Leg., R.S., Ch. 836 (H.B.
2555), Sec. 2

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For text of section as added by Acts 2023, 88th Leg., R.S., Ch. 410
(H.B. 1500), Sec. 13, see other Sec. 38.078.
Sec. 38.078. TRANSMISSION AND DISTRIBUTION SYSTEM RESILIENCY
PLAN AND COST RECOVERY. (a) In this section, "plan" means a
transmission and distribution system resiliency plan described by
Subsection (b).
(b) An electric utility may file, in a manner authorized by
commission rule, a plan to enhance the resiliency of the utility's
transmission and distribution system through at least one of the
following methods:
(1) hardening electrical transmission and distribution
facilities;
(2) modernizing electrical transmission and distribution
facilities;
(3) undergrounding certain electrical distribution lines;
(4) lightning mitigation measures;
(5) flood mitigation measures;
(6) information technology;
(7) cybersecurity measures;
(8) physical security measures;
(9) vegetation management; or
(10) wildfire mitigation and response.
(c) A plan must explain the systematic approach the electric
utility will use to carry out the plan during at least a three-year
period.
(d) In determining whether to approve a plan filed under this
section, the commission shall consider:
(1) the extent to which the plan is expected to enhance
system resiliency, including whether the plan prioritizes areas of
lower performance; and
(2) the estimated costs of implementing the measures
proposed in the plan.
(e) The commission shall issue an order to approve, modify, or
deny a plan filed under Subsection (b) and any associated rider
described by Subsection (i) not later than the 180th day after the
plan is filed with the commission. The commission may approve a plan
only if the commission determines that approving the plan is in the
public interest.
(f) For a plan approved by the commission, with or without
modification, an electric utility may request a good cause exception

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on implementing all or some of the measures in the plan if

operational needs, business needs, financial conditions, or supply
chain or labor conditions dictate the exception. The commission's
denial of a plan is not considered to be a finding of the prudence or
imprudence of a measure or cost in the plan for the purposes of
Chapter 36 or this chapter.
(g) An electric utility for which the commission has approved a
plan under this section may request that the commission review an
updated plan submitted by the electric utility. The updated plan
must comply with any applicable commission rules and take effect on a
date that is not earlier than the third anniversary of the approval
date of the utility's most recently approved plan. The commission
shall review and approve, modify, or deny the updated plan in the
manner provided by Subsections (d), (e), and (f).
(h) An electric utility's implementation of a plan approved
under this section may be reviewed for the purposes of Chapter 36 or
this chapter. If the commission determines that the costs to
implement an approved plan were imprudently incurred or otherwise
unreasonable, those costs are subject to disallowance.
(i) Notwithstanding any other law, an electric utility may file
with a plan an application for a rider to recover the electric
utility's distribution investment that is made to implement a plan
and is used and useful to the electric utility in providing service
to the public. The electric utility may file the application before
the electric utility places into service the distribution investment
to implement an approved plan. The commission may approve the rider
application before the electric utility places into service the
distribution investment to implement an approved plan. The
commission may not approve a rider that would allow an electric
utility to begin recovering the distribution investment before the
utility begins to use the investment to provide service to the
public. If the commission approves or modifies the plan, the
commission shall determine the appropriate terms of the rider in the
approval order. The commission shall adopt a procedure for
reconciliation of an electric utility's distribution-related costs to
implement an approved plan.
(j) As part of a review described by Subsection (g), the
commission shall reconcile the rider authorized under Subsection (i)
to determine the electric utility's reasonably and prudently incurred
plan costs.

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(k) If an electric utility that files a plan with the

commission does not apply for a rider under Subsection (i), after
commission review, the utility may defer all or a portion of the
distribution-related costs relating to the implementation of the plan
for future recovery as a regulatory asset, including depreciation
expense and carrying costs at the utility's weighted average cost of
capital established in the commission's final order in the utility's
most recent base rate proceeding in a manner consistent with Chapter
36, and use commission authorized cost recovery alternatives under
Sections 36.209 and 36.210 or another general rate proceeding.
(l) Plan costs considered by the commission to be reasonable
and prudent may include only incremental costs that are not already
being recovered through the electric utility's base rates or any
other rate rider and must be allocated to customer classes pursuant
to the rate design most recently approved by the commission.

Added by Acts 2023, 88th Leg., R.S., Ch. 836 (H.B. 2555), Sec. 2, eff.
June 13, 2023.

Text of section as added by Acts 2023, 88th Leg., R.S., Ch. 410 (H.B.
1500), Sec. 13
For text of section as added by Acts 2023, 88th Leg., R.S., Ch. 836
(H.B. 2555), Sec. 2, see other Sec. 38.078.
Sec. 38.078. CIRCUIT SEGMENTATION STUDY AND COST RECOVERY. (a)
Not later than September 15, 2023, the commission shall direct each
transmission and distribution utility to perform a circuit
segmentation study.
(b) A circuit segmentation study must:
(1) use an engineering analysis to examine whether and how
the transmission and distribution utility's transmission and
distribution systems can be segmented and sectionalized to manage and
rotate outages more evenly across all customers and circuits, while
maintaining the protections offered to critical facilities;
(2) include an engineering analysis of the feasibility of
using sectionalization, automated reclosers, and other technology to
break up the circuits that host significant numbers of critical
facilities into smaller segments for outage management purposes to
enable more granular and flexible outage management;
(3) identify feeders with critical facilities that, if

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equipped with facility-specific backup power systems and

segmentation, can enhance the utility's outage management
flexibility; and
(4) include an estimate of the time, capital cost, and
expected improvements to load-shed management associated with the
circuit segmentation study.
(c) Each transmission and distribution utility shall submit a
report of the conclusions of the utility's study to the commission
not later than September 1, 2024.
(d) The commission shall review each circuit segmentation study
not later than March 15, 2025.

Added by Acts 2023, 88th Leg., R.S., Ch. 410 (H.B. 1500), Sec. 13,
eff. September 1, 2023.

SUBCHAPTER E. INFRASTRUCTURE IMPROVEMENT AND MAINTENANCE REPORT

Sec. 38.101. REPORT ON INFRASTRUCTURE IMPROVEMENT AND
MAINTENANCE. (a) Not later than May 1 of each year, each electric
utility shall submit to the commission a report describing the
utility's activities related to:
(1) identifying areas that are susceptible to damage during
severe weather and hardening transmission and distribution facilities
in those areas;
(2) vegetation management; and
(3) inspecting distribution poles.
(b) Each electric utility shall include in a report required
under Subsection (a) a summary of the utility's activities related to
preparing for emergency operations.

Added by Acts 2009, 81st Leg., R.S., Ch. 1280 (H.B. 1831), Sec. 2.03,
eff. September 1, 2009.

Sec. 38.102. REPORTS ON SAFETY PROCESSES AND INSPECTIONS. (a)

Each electric utility, municipally owned utility, and electric
cooperative that owns or operates overhead transmission or
distribution assets shall submit to the commission a report that
includes:
(1) a summary description of hazard recognition training
documents provided by the utility or electric cooperative to its

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employees related to overhead transmission and distribution

facilities; and
(2) a summary description of training programs provided to
employees by the utility or electric cooperative related to the
National Electrical Safety Code for the construction of electric
transmission and distribution lines.
(b) An electric utility, municipally owned utility, or electric
cooperative shall submit an updated report not later than the 30th
day after the date the utility or electric cooperative finalizes a
material change to a document or program included in a report
submitted under Subsection (a).
(c) Not later than May 1 every five years, each electric
utility, municipally owned utility, and electric cooperative that
owns or operates overhead transmission facilities greater than 60
kilovolts shall submit to the commission a report for the preceding
five-year period ending on December 31 of the preceding calendar year
that includes:
(1) the percentage of overhead transmission facilities
greater than 60 kilovolts inspected for compliance with the National
Electrical Safety Code relating to vertical clearance in the
reporting period; and
(2) the percentage of the overhead transmission facilities
greater than 60 kilovolts anticipated to be inspected for compliance
with the National Electrical Safety Code relating to vertical
clearance during the five-year period beginning on January 1 of the
year in which the report is submitted.
(d) Subject to Subsection (f), not later than May 1 of each
year, each electric utility, municipally owned utility, or electric
cooperative that owns or operates overhead transmission facilities
greater than 60 kilovolts shall submit to the commission a report on
the overhead transmission facilities for the preceding calendar year
that includes information regarding:
(1) the number of identified occurrences of noncompliance
with Section 38.004 regarding the vertical clearance requirements of
the National Electrical Safety Code for overhead transmission
facilities;
(2) whether the utility or electric cooperative has actual
knowledge that any portion of the utility's or electric cooperative's
transmission system is not in compliance with Section 38.004
regarding the vertical clearance requirements of the National

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Electrical Safety Code; and

(3) whether the utility or electric cooperative has actual
knowledge of any violations of easement agreements with the United
States Army Corps of Engineers relating to Section 38.004 regarding
the vertical clearance requirements of the National Electrical Safety
Code for overhead transmission facilities.
(e) Subject to Subsection (f), not later than May 1 of each
year, each electric utility, municipally owned utility, or electric
cooperative that owns or operates overhead transmission facilities
greater than 60 kilovolts or distribution facilities greater than 1
kilovolt shall submit to the commission a report for the preceding
calendar year that includes:
(1) the number of fatalities or injuries of individuals
other than employees, contractors, or other persons qualified to work
in proximity to overhead high voltage lines involving transmission or
distribution assets related to noncompliance with the requirements of
Section 38.004; and
(2) a description of corrective actions taken or planned to
prevent the reoccurrence of fatalities or injuries described by
Subdivision (1).
(f) Violations resulting from, and incidents, fatalities, or
injuries attributable to a violation resulting from, a natural
disaster, weather event, or man-made act or force outside of a
utility's or electric cooperative's control are not required to be
included in the portions of the reports required under Subsections
(d) and (e).
(g) Not later than September 1, each year the commission shall
make the reports publicly available on the commission's Internet
website.
(h) A report, and any required information contained in a
report, made on an incident or violation under this section is not
admissible in a civil or criminal proceeding against the electric
utility, municipally owned utility, or electric cooperative, or the
utility's or electric cooperative's employees, directors, or
officers. The commission may otherwise take enforcement actions under
the commission's authority.

Added by Acts 2019, 86th Leg., R.S., Ch. 1320 (H.B. 4150), Sec. 5,
eff. September 1, 2019.

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SUBCHAPTER F. TEXAS ELECTRICITY SUPPLY CHAIN SECURITY AND MAPPING

COMMITTEE
Sec. 38.201. TEXAS ELECTRICITY SUPPLY CHAIN SECURITY AND
MAPPING COMMITTEE. (a) In this subchapter, "electricity supply
chain" means:
(1) facilities and methods used for producing, treating,
processing, pressurizing, storing, or transporting natural gas for
delivery to electric generation facilities;
(2) critical infrastructure necessary to maintain
electricity service; and
(3) roads necessary to access facilities in the electricity
supply chain.
(a-1) A reference in this subchapter to the "electricity supply
chain" includes water and wastewater treatment plants.
(b) The Texas Electricity Supply Chain Security and Mapping
Committee is established to:
(1) map this state's electricity supply chain;
(2) identify critical infrastructure sources in the
electricity supply chain;
(3) establish best practices to prepare facilities in the
electricity supply chain to maintain service in an extreme weather
event and recommend oversight and compliance standards for those
facilities; and
(4) designate priority service needs to prepare for,
respond to, and recover from an extreme weather event.
(c) The committee is composed of:
(1) the executive director of the commission;
(2) the executive director of the Railroad Commission of
Texas;
(3) the president and the chief executive officer of the
independent organization certified under Section 39.151 for the ERCOT
power region;
(4) the chief of the Texas Division of Emergency
Management; and
(5) the executive director of the Texas Department of
Transportation.
(d) Each member of the committee may designate a personal
representative from the member's organization to represent the member
on the committee. A member is responsible for the acts and omissions
of the designee related to the designee's representation on the

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committee.
(e) The executive director of the commission serves as the
chair of the committee. The executive director of the Railroad
Commission of Texas serves as vice chair of the committee.

Added by Acts 2021, 87th Leg., R.S., Ch. 426 (S.B. 3), Sec. 17, eff.
June 8, 2021.
Amended by:
Acts 2023, 88th Leg., R.S., Ch. 85 (S.B. 1093), Sec. 2, eff. May
19, 2023.

Sec. 38.202. ADMINISTRATION. (a) The committee shall meet at

least once each calendar quarter at a time determined by the
committee and at the call of the chair.
(b) A member who is an ex officio member from a state agency
shall be reimbursed for actual and necessary expenses in carrying out
committee responsibilities from money appropriated for that purpose
in the agency's budget. Other members of the committee may receive
reimbursement for actual and necessary expenses in carrying out
committee responsibilities from money appropriated for that purpose.
(c) The commission, the Railroad Commission of Texas, the Texas
Division of Emergency Management, and the Texas Department of
Transportation shall provide staff as necessary to assist the
committee in carrying out the committee's duties and
responsibilities.
(d) The independent organization certified under Section 39.151
for the ERCOT power region shall provide staff as necessary to assist
the committee in carrying out the committee's duties and
responsibilities.
(e) Except as otherwise provided by this subchapter, the
committee is not subject to Chapters 2001, 551, and 552, Government
Code.
(f) Information written, produced, collected, assembled, or
maintained under law or in connection with the transaction of
official business by the committee or an officer or employee of the
committee is subject to Section 552.008, Government Code. This
subsection does not apply to the physical locations of critical
facilities, maps created under this subchapter, or proprietary
information created or gathered during the mapping process.

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Added by Acts 2021, 87th Leg., R.S., Ch. 426 (S.B. 3), Sec. 17, eff.
June 8, 2021.
Amended by:
Acts 2023, 88th Leg., R.S., Ch. 85 (S.B. 1093), Sec. 3, eff. May
19, 2023.

Sec. 38.203. POWERS AND DUTIES OF COMMITTEE. (a) The

committee shall:
(1) map the state's electricity supply chain in order to
designate priority electricity service needs during extreme weather
events;
(2) identify and designate the sources in the electricity
supply chain necessary to operate critical infrastructure, as defined
by Section 421.001, Government Code;
(3) develop a communication system between critical
infrastructure sources, the commission, and the independent
organization certified under Section 39.151 for the ERCOT power
region to ensure that electricity and natural gas supplies in the
electricity supply chain are prioritized to those sources during an
extreme weather event; and
(4) establish best practices to prepare facilities in the
electricity supply chain to maintain service in an extreme weather
event and recommend oversight and compliance standards for those
facilities.
(b) The committee shall update the electricity supply chain map
at least once each year.
(c) The commission shall:
(1) create and maintain a database identifying critical
infrastructure sources with priority electricity needs to be used
during an extreme weather event; and
(2) update the database at least once each year.
(d) The information maintained in the database is confidential
under Section 418.181, Government Code, and not subject to disclosure
under Chapter 552, Government Code.
(e) The committee shall provide the Texas Energy Reliability
Council with access to the electricity supply chain map.
(f) On request, the committee shall provide view-only access to
the electricity supply chain map to:
(1) an electric utility, a transmission and distribution

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utility, an electric cooperative, or a municipally owned utility;

(2) an operator of a gas supply chain facility, as defined
by Section 86.044, Natural Resources Code; or
(3) an operator of a gas pipeline facility described by
Section 121.2015.
(g) Access to the electricity supply chain map by an entity
described by Subsection (f)(1) is limited to the critical natural gas
facilities on the map that are located in the requesting entity's
service area.
(h) The committee may not provide an entity described by
Subsection (f)(1) with access to the electricity supply chain map
unless the entity has complied with Section 37.157.
(i) Access to the electricity supply chain map by an operator
described by Subsections (f)(2) and (3) is limited to the critical
natural gas facilities operated by the requesting operator.

Added by Acts 2021, 87th Leg., R.S., Ch. 426 (S.B. 3), Sec. 17, eff.
June 8, 2021.
Amended by:
Acts 2023, 88th Leg., R.S., Ch. 85 (S.B. 1093), Sec. 4, eff. May
19, 2023.

Sec. 38.204. MAPPING REPORT. (a) Not later than January 1,

2022, the committee shall submit a report to the governor, the
lieutenant governor, the speaker of the house of representatives, the
legislature, and the Texas Energy Reliability Council on the
activities and findings of the committee. The report must:
(1) provide an overview of the committee's findings
regarding mapping the electricity supply chain and identifying
sources necessary to operate critical infrastructure;
(2) recommend a clear and thorough communication system for
the commission, the Railroad Commission of Texas, the Texas Division
of Emergency Management, and the independent organization certified
under Section 39.151 for the ERCOT power region and critical
infrastructure sources in this state to ensure that electricity
supply is prioritized to those sources during extreme weather events;
and
(3) include a list of the established best practices and
recommended oversight and compliance standards adopted under Section

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38.203(a)(4).
(b) The report is public information except for portions
considered confidential under Chapter 552, Government Code, or other
state or federal law.

Added by Acts 2021, 87th Leg., R.S., Ch. 426 (S.B. 3), Sec. 17, eff.
June 8, 2021.

CHAPTER 39. RESTRUCTURING OF ELECTRIC UTILITY INDUSTRY

SUBCHAPTER A. GENERAL PROVISIONS
Sec. 39.001. LEGISLATIVE POLICY AND PURPOSE. (a) The
legislature finds that the production and sale of electricity is not
a monopoly warranting regulation of rates, operations, and services
and that the public interest in competitive electric markets requires
that, except for transmission and distribution services and for the
recovery of stranded costs, electric services and their prices should
be determined by customer choices and the normal forces of
competition. As a result, this chapter is enacted to protect the
public interest during the transition to and in the establishment of
a fully competitive electric power industry.
(b) The legislature finds that it is in the public interest to:
(1) implement on January 1, 2002, a competitive retail
electric market that allows each retail customer to choose the
customer's provider of electricity and that encourages full and fair
competition among all providers of electricity;
(2) allow utilities with uneconomic generation-related
assets and purchased power contracts to recover the reasonable excess
costs over market of those assets and purchased power contracts;
(3) educate utility customers about anticipated changes in
the provision of retail electric service to ensure that the benefits
of the competitive market reach all customers; and
(4) protect the competitive process in a manner that
ensures the confidentiality of competitively sensitive information
during the transition to a competitive market and after the
commencement of customer choice.
(c) Regulatory authorities, excluding the governing body of a
municipally owned electric utility that has not opted for customer
choice or the body vested with power to manage and operate a
municipally owned electric utility that has not opted for customer

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choice, may not make rules or issue orders regulating competitive

electric services, prices, or competitors or restricting or
conditioning competition except as authorized in this title and may
not discriminate against any participant or type of participant
during the transition to a competitive market and in the competitive
market.
(d) Regulatory authorities, excluding the governing body of a
municipally owned electric utility that has not opted for customer
choice or the body vested with power to manage and operate a
municipally owned electric utility that has not opted for customer
choice, shall authorize or order competitive rather than regulatory
methods to achieve the goals of this chapter to the greatest extent
feasible and shall adopt rules and issue orders that are both
practical and limited so as to impose the least impact on
competition.
(e) Judicial review of competition rules adopted by the
commission shall be conducted under Chapter 2001, Government Code,
except as otherwise provided by this chapter. Judicial review of the
validity of competition rules shall be commenced in the Court of
Appeals for the Fifteenth Court of Appeals District and shall be
limited to the commission's rulemaking record. The rulemaking record
consists of:
(1) the notice of the proposed rule;
(2) the comments of all interested persons;
(3) all studies, reports, memoranda, or other materials on
which the commission relied in adopting the rule; and
(4) the order adopting the rule.
(f) A person who challenges the validity of a competition rule
must file a notice of appeal with the court of appeals and serve the
notice on the commission not later than the 15th day after the date
on which the rule as adopted is published in the Texas Register. The
notice of appeal shall designate the person challenging the rule as
the appellant and the commission as the appellee. The commission
shall prepare the rulemaking record and file it with the court of
appeals not later than the 30th day after the date the notice of
appeal is served on the commission. The court of appeals shall hear
and determine each appeal as expeditiously as possible with lawful
precedence over other matters. The appellant, and any person who is
permitted by the court to intervene in support of the appellant's
claims, shall file and serve briefs not later than the 30th day after

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the date the commission files the rulemaking record. The commission,
and any person who is permitted by the court to intervene in support
of the rule, shall file and serve briefs not later than the 60th day
after the date the appellant files the appellant's brief. The court
of appeals may, on its own motion or on motion of any person for good
cause, modify the filing deadlines prescribed by this subsection.
The court of appeals shall render judgment affirming the rule or
reversing and, if appropriate on reversal, remanding the rule to the
commission for further proceedings, consistent with the court's
opinion and judgment. The Texas Rules of Appellate Procedure apply
to an appeal brought under this section to the extent not
inconsistent with this section.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.
Amended by:
Acts 2023, 88th Leg., R.S., Ch. 459 (S.B. 1045), Sec. 1.13, eff.
September 1, 2023.

Sec. 39.002. APPLICABILITY. This chapter, other than Sections

39.151, 39.1516, 39.155, 39.157(e), 39.161, 39.162, 39.163, 39.203,
39.9051, 39.9052, and 39.914(e), and Subchapters M and N, does not
apply to a municipally owned utility or an electric cooperative.
Sections 39.157(e) and 39.203 apply only to a municipally owned
utility or an electric cooperative that is offering customer choice.
If there is a conflict between the specific provisions of this
chapter and any other provisions of this title, except for Chapters
40 and 41, the provisions of this chapter control.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.
Amended by:
Acts 2007, 80th Leg., R.S., Ch. 939 (H.B. 3693), Sec. 19, eff.
September 1, 2007.
Acts 2019, 86th Leg., R.S., Ch. 467 (H.B. 4170), Sec. 16.001,
eff. September 1, 2019.
Acts 2019, 86th Leg., R.S., Ch. 610 (S.B. 936), Sec. 2, eff.
September 1, 2019.
Acts 2021, 87th Leg., R.S., Ch. 908 (H.B. 4492), Sec. 2, eff.
June 16, 2021.
Acts 2021, 87th Leg., R.S., Ch. 950 (S.B. 1580), Sec. 2, eff.
June 18, 2021.

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Reenacted and amended by Acts 2023, 88th Leg., R.S., Ch. 410 (H.B.
1500), Sec. 14, eff. September 1, 2023.
Reenacted and amended by Acts 2023, 88th Leg., R.S., Ch. 768 (H.B.
4595), Sec. 22.003(a), eff. September 1, 2023.

Sec. 39.003. CONTESTED CASES. Unless specifically provided

otherwise, each commission proceeding under this chapter, other than
a rulemaking proceeding, report, notification, or registration, shall
be conducted as a contested case and the burden of proof is on the
incumbent electric utility.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

SUBCHAPTER B. TRANSITION TO COMPETITIVE RETAIL ELECTRIC MARKET

Sec. 39.051. UNBUNDLING. (a) On or before September 1, 2000,
each electric utility shall separate from its regulated utility
activities its customer energy services business activities that are
otherwise also already widely available in the competitive market.
(b) Not later than January 1, 2002, each electric utility shall
separate its business activities from one another into the following
units:
(1) a power generation company;
(2) a retail electric provider; and
(3) a transmission and distribution utility.
(c) An electric utility may accomplish the separation required
by Subsection (b) either through the creation of separate
nonaffiliated companies or separate affiliated companies owned by a
common holding company or through the sale of assets to a third
party. An electric utility may create separate transmission and
distribution utilities. Notwithstanding any other provision of this
chapter, an electric utility that does not have stranded costs
described by Section 39.254 and that on September 1, 2005, has not
finalized unbundling pursuant to a commission order approving an
unbundling plan may also meet the requirements of Subsection (b) for
generation facilities existing on September 1, 2005, in the Electric
Reliability Council of Texas if it meets and maintains compliance
with the following requirements:
(1) the electric utility has no more than 400 megawatts of

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Texas jurisdictional capacity from generating units within the

Electric Reliability Council of Texas that have not been mothballed
or retired;
(2) the electric utility has a contract or contracts with
separate nonaffiliated companies or separate affiliated companies for
the sale of all of the output from its generating units that have not
been mothballed or retired with a contract term that is no shorter
than 20 years or the life of the generating units, whichever is
shorter; and
(3) the electric utility has a separate division within the
electric utility for its generation business activities.
(c-1) A separate division described by Subsection (c)(3) is
subject to Subsection (d) and, for the purposes of this chapter, is
considered a separate affiliated power generation company and a
competitive affiliate.
(d) Each electric utility shall unbundle under this section in
a manner that provides for a separation of personnel, information
flow, functions, and operations, consistent with Section 39.157(d).
(e) Each electric utility shall file with the commission a plan
to implement this section by January 10, 2000.
(f) The commission shall adopt the utility's plan for business
separation required by Subsection (b), adopt the plan with changes,
or reject the plan and require the utility to file a new plan.
(g) Transactions by electric utilities involving sales,
transfers, or other disposition of assets to accomplish the purposes
of this section are not subject to Section 14.101, 35.034, or 35.035.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.
Amended by:
Acts 2005, 79th Leg., Ch. 413 (S.B. 1668), Sec. 3, eff. June 17,
2005.

Sec. 39.052. FREEZE ON EXISTING RETAIL BASE RATE TARIFFS. (a)

Until January 1, 2002, an electric utility shall provide retail
electric service within its certificated service area in accordance
with the electric utility's retail base rate tariffs in effect on
September 1, 1999, including its purchased power cost recovery
factor.
(b) During the freeze period, an electric utility may not

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increase its retail base rates above the rates provided by this
section except for losses caused by force majeure as provided by
Section 39.055.
(c) Notwithstanding any other provision of this title, during
the freeze period the regulatory authority may not reduce the retail
base rates of an electric utility, except as may be ordered as
stipulated to by an electric utility in a proceeding for which a
final order had not been issued by January 1, 1999.
(d) During the freeze period, the retail base rates, overall
revenues, return on invested capital, and net income of an electric
utility are not subject to complaint, hearing, or determination as to
reasonableness.
(e) An electric utility that has a rate proceeding pending
before the commission as of January 2, 1999, shall provide service in
accordance with the tariffs approved in that proceeding from the date
of approval until the end of the freeze period.
(f) Nothing in this section affects the authority of the
commission to fulfill its obligations under Section 39.262.
(g) Nothing in this section shall deny a utility its right to
have the commission conduct proceedings and issue a final order
pertaining to any matter that may be remanded to the commission by a
court having jurisdiction, except that the final order may not affect
the rates charged to customers during the freeze period but shall be
taken into account during the utility's true-up proceeding under
Section 39.262.
(h) Nothing in this title shall be construed to prevent an
electric utility or a transmission and distribution utility from
filing, and the commission from approving, a change in wholesale
transmission service rates during the freeze period.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 39.053. COST RECOVERY ADJUSTMENTS. This subchapter does

not limit or alter the ability of an electric utility during the
freeze period to revise its fuel factor or to reconcile fuel expenses
and to either refund fuel overcollections or surcharge fuel
undercollections to customers, as authorized by its tariffs and
Sections 36.203 and 36.205.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

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Sec. 39.054. RETAIL ELECTRIC SERVICE DURING FREEZE PERIOD. (a)

An electric utility shall provide retail electric service during the
freeze period in accordance with any contract terms applicable to a
particular retail customer approved by the regulatory authority and
in effect on December 31, 1998.
(b) Nothing in Sections 39.052(c) and (d) shall be construed to
restrict any customer's right to complain during the freeze period to
the regulatory authority regarding the quality of retail electric
service provided by the electric utility or the applicability of an
electric utility's particular tariff to the customer.
(c) Nothing in this title shall be construed to restrict an
electric utility, voluntarily and at its sole discretion, from
offering new services or new tariff options to its customers during
the freeze period, consistent with Section 39.051(a).
(d) Any offering of new services or tariff options under this
section shall be equal to or greater than an electric utility's long-
run marginal cost and may not be unreasonably preferential,
prejudicial, discriminatory, predatory, or anticompetitive.
(e) Revenue from any new offering under this section shall be
accounted for in a manner consistent with Section 36.007.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 39.055. FORCE MAJEURE. (a) An electric utility may

recover losses resulting from force majeure through an increase in
its retail base rates during the freeze period.
(b) Notwithstanding Subchapter C, Chapter 36, the regulatory
authority, after a hearing to determine the electric utility's losses
from force majeure, shall permit the utility to fully collect any
approved force majeure increase through an appropriate customer
surcharge mechanism.
(c) For purposes of this section, "force majeure" means a major
event or combination of major events, including new or expanded state
or federal statutory or regulatory requirements; hurricanes,
tornadoes, ice storms, or other natural disasters; or acts of war,
terrorism, or civil disturbance, beyond the control of an electric
utility that the regulatory authority finds increases the utility's

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total reasonable and necessary nonfuel costs or decreases the

utility's total nonfuel revenues related to the generation and
delivery of electricity by more than 10 percent for any calendar year
during the freeze period. The term does not include any changes in
general economic conditions such as inflation, interest rates, or
other factors of general application.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

SUBCHAPTER C. RETAIL COMPETITION

Sec. 39.101. CUSTOMER SAFEGUARDS. (a) Before customer choice
begins on January 1, 2002, the commission shall ensure that retail
customer protections are established that entitle a customer:
(1) to safe, reliable, and reasonably priced electricity,
including protection against service disconnections in an extreme
weather emergency as provided by Subsection (h) or in cases of
medical emergency or nonpayment for unrelated services;
(2) to privacy of customer consumption and credit
information;
(3) to bills presented in a clear format and in language
readily understandable by customers;
(4) to the option to have all electric services on a single
bill, except in those instances where multiple bills are allowed
under Chapters 40 and 41;
(5) to protection from discrimination on the basis of race,
color, sex, nationality, religion, or marital status;
(6) to accuracy of metering and billing;
(7) to information in English and Spanish and any other
language as necessary concerning rates, key terms and conditions, in
a standard format that will permit comparisons between price and
service offerings, and the environmental impact of certain production
facilities;
(8) to information in English and Spanish and any other
language as necessary concerning low-income assistance programs and
deferred payment plans; and
(9) to other information or protections necessary to ensure
high-quality service to customers.
(b) A customer is entitled:
(1) to be informed about rights and opportunities in the

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transition to a competitive electric industry;

(2) to choose the customer's retail electric provider
consistent with this chapter, to have that choice honored, and to
assume that the customer's chosen provider will not be changed
without the customer's informed consent;
(3) to have access to providers of energy efficiency
services, to on-site distributed generation, and to providers of
energy generated by renewable energy resources;
(4) to be served by a provider of last resort that offers a
commission-approved standard service package;
(5) to receive sufficient information to make an informed
choice of service provider;
(6) to be protected from unfair, misleading, or deceptive
practices, including protection from being billed for services that
were not authorized or provided;
(7) to have an impartial and prompt resolution of disputes
with its chosen retail electric provider and transmission and
distribution utility;
(8) to participation in demand response programs through
retail electric providers that offer demand response programs; and
(9) to receive notice from the retail electric provider
that serves the customer when the independent organization certified
under Section 39.151 for the ERCOT power region issues an emergency
energy alert.
(c) A retail electric provider, power generation company,
aggregator, or other entity that provides retail electric service may
not refuse to provide retail electric or electric generation service
or otherwise discriminate in the provision of electric service to any
customer because of race, creed, color, national origin, ancestry,
sex, marital status, lawful source of income, disability, or familial
status. A retail electric provider, power generation company,
aggregator, or other entity that provides retail electric service may
not refuse to provide retail electric or electric generation service
to a customer because the customer is located in an economically
distressed geographic area or qualifies for low-income affordability
or energy efficiency services. The commission shall require a
provider to comply with this subsection as a condition of
certification or registration.
(d) A retail electric provider, power generation company,
aggregator, or other entity that provides retail electric service

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shall submit reports to the commission and the office annually and on
request relating to the person's compliance with this section. The
commission by rule shall specify the form in which a report must be
submitted. A report must include:
(1) information regarding the extent of the person's
coverage;
(2) information regarding the service provided, compiled by
zip code and census tract; and
(3) any other information the commission or the office
considers relevant to determine compliance.
(e) The commission has the authority to adopt and enforce such
rules as may be necessary or appropriate to carry out Subsections
(a)-(d), including rules for minimum service standards for a retail
electric provider relating to customer deposits and the extension of
credit, switching fees, levelized billing programs, interconnection
and use of on-site generation, termination of service, and quality of
service. The commission has jurisdiction over all providers of
electric service in enforcing Subsections (a)-(d) and may assess
civil and administrative penalties under Section 15.023 and seek
civil penalties under Section 15.028.
(f) On or before June 30, 2001, the commission shall modify its
current rules regarding customer protections to ensure that at least
the same level of customer protection against potential abuses and
the same quality of service that exists on December 31, 1999, is
maintained in a restructured electric industry.
(g) Compliance with Subsections (a)-(e) by a provider of
electric service which is a municipally owned utility shall be
administered solely by the governing body of the municipally owned
utility, which shall adopt, implement, and enforce, as to the
municipally owned utility, rules having the effect of accomplishing
the objectives of Subsections (a)-(e). Reports containing the
information required by Subsection (d) shall be filed by the
municipally owned utility with the governing body.
(h) A retail electric provider, power generation company,
aggregator, or other entity that provides retail electric service may
not disconnect service to a residential customer during an extreme
weather emergency or on a weekend day. The entity providing service
shall defer collection of the full payment of bills that are due
during an extreme weather emergency until after the emergency is over
and shall work with customers to establish a pay schedule for

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deferred bills. For purposes of this subsection, "extreme weather

emergency" means a period when:
(1) the previous day's highest temperature did not exceed
32 degrees Fahrenheit and the temperature is predicted to remain at
or below that level for the next 24 hours according to the nearest
National Weather Service reports; or
(2) the National Weather Service issues a heat advisory for
any county in the relevant service territory, or when such an
advisory has been issued on any one of the previous two calendar
days.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.
Amended by:
Acts 2023, 88th Leg., R.S., Ch. 945 (S.B. 1699), Sec. 2, eff.
September 1, 2023.

Sec. 39.102. RETAIL CUSTOMER CHOICE. (a) Each retail customer

in this state, except retail customers of electric cooperatives and
municipally owned utilities that have not opted for customer choice,
shall have customer choice on and after January 1, 2002.
(b) The affiliated retail electric provider of the electric
utility serving a retail customer on December 31, 2001, may continue
to serve that customer until the customer chooses service from a
different retail electric provider, an electric cooperative offering
customer choice, or a municipally owned utility offering customer
choice.
(c) An electric utility that has in effect a systemwide freeze
for residential and commercial customers in effect September 1, 1997,
extending beyond December 31, 2001, that has been found by a
regulatory authority to be in the public interest is not subject to
this chapter. At the expiration of the utility's freeze period, the
utility shall be subject to this chapter and, at that time, has no
claim for stranded cost recovery.
(d) The commission shall oversee the compliance with this
chapter by electric utilities that were not subject to this chapter
before September 1, 2003, and in so doing shall establish schedules
and procedures and require commission approvals as it deems necessary
to achieve the objectives of this chapter. This subsection does not
apply to an electric utility to which Subsection (c) applies.

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(e) In establishing a schedule under Subsection (d), the

commission shall consider:
(1) the effect of customer choice on the reliability of
service provided by the electric utility;
(2) whether the electric utility's service area is located
in more than one power region;
(3) whether any applicable power region has been certified
as a qualifying power region under Section 39.152(a);
(4) whether other electric utilities in the power region
offer retail customer choice; and
(5) any other relevant factor.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.
Amended by Acts 2003, 78th Leg., ch. 1327, Sec. 2, eff. Sept. 1,
2003.

Sec. 39.1025. LIMITATIONS ON TELEPHONE SOLICITATION. (a) A

person may not make or cause to be made a telephone solicitation to a
nonresidential electric customer who has given notice to the
commission of the customer's objection to receiving telephone
solicitations relating to the customer's choice of retail electric
providers.
(b) The commission shall establish and provide for the
operation of a database to compile a list of nonresidential electric
customers who object to receiving telephone solicitations. The
commission may operate the database or contract with another entity
to operate the database.
(c) A customer shall pay a fee of not more than $5 for
inclusion in the database. The commission shall prescribe the amount
of the fee.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.
Amended by:
Acts 2005, 79th Leg., Ch. 171 (H.B. 210), Sec. 3, eff. May 27,
2005.

Sec. 39.103. COMMISSION AUTHORITY TO DELAY COMPETITION AND SET

NEW RATES. If the commission determines under Section 39.104 that a
power region is unable to offer fair competition and reliable service

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to all retail customer classes on January 1, 2002, the commission

shall delay customer choice for the power region and may on or after
January 1, 2002, establish new rates for all electric utilities in
the power region as provided by Chapter 36.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 39.104. CUSTOMER CHOICE PILOT PROJECTS. (a) Customer

choice pilot projects may be used to allow the commission to evaluate
the ability of each power region and electric utility to implement
customer choice. However, in a multiply certificated area, an
electric utility may not include customers that were served by an
electric cooperative or a municipally owned utility on May 1, 1999.
(b) The commission shall require each electric utility to offer
customer choice in its service area within this state amounting to
five percent of the utility's combined load of all customer classes
within this state beginning on June 1, 2001.
(c) The load designated for customer choice under this section
shall be distributed among all customer classes of a utility
consistent with the purpose of this section and subject to commission
approval.
(d) Customers participating in a pilot project under this
section may buy electric energy from any retail electric provider
certified by the commission under Section 39.352, including an
affiliated retail electric provider; provided, however, that a
retail electric provider may not participate in a pilot project in
the certificated service area served by the electric utility with
which it is affiliated.
(e) Each utility operating a pilot project under this section
shall charge residential and small commercial customers in accordance
with Section 39.052.
(f) The commission may prescribe reporting requirements it
considers necessary to evaluate a pilot project consistent with the
purpose of this section.
(g) Customers having customer choice under this section shall
be billed as provided by Section 39.107.
(h) The commission may prescribe terms and conditions it
considers necessary to prohibit anticompetitive practices and to
encourage customer choice offered under this section.

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(i) Notwithstanding any other provision of this title, a retail

electric provider participating in a pilot project under this section
is not an electric utility or a retail electric utility.
(j) Twenty percent of the load designated for customer choice
under this section shall be initially set aside for aggregated loads.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 39.105. LIMITATION ON SALE OF ELECTRICITY. (a) After

January 1, 2002, a transmission and distribution utility may not sell
electricity or otherwise participate in the market for electricity
except for the purpose of buying electricity to serve its own needs.
(b) A person or retail electric utility may not provide,
furnish, or make available electric service at retail within the
certificated service area of an electric cooperative that has not
adopted customer choice or a municipally owned utility that has not
adopted customer choice. However, this subsection does not prohibit
the provision of electric service in multiply certificated service
areas to customers of any other retail electric utility.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 39.106. PROVIDER OF LAST RESORT. (a) The commission

shall designate retail electric providers in areas of the state in
which customer choice is in effect to serve as providers of last
resort.
(b) A provider of last resort shall offer a standard retail
service package for each class of customers designated by the
commission at a fixed, nondiscountable rate approved by the
commission.
(c) A provider of last resort shall provide the standard retail
service package to any requesting customer in the territory for which
it is the provider of last resort.
(d) The commission shall designate the provider or providers of
last resort not later than June 1, 2001.
(e) The commission shall determine the procedures and criteria,
which may include the solicitation of bids, for designating a
provider or providers of last resort. The commission may redesignate
the provider of last resort according to a schedule it considers

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appropriate.
(f) In the event that no retail electric provider applies to be
the provider of last resort for a given area of the state on
reasonable terms and conditions, the commission may require a retail
electric provider to become the provider of last resort as a
condition of receiving or maintaining a certificate under Section
39.352.
(g) In the event that a retail electric provider fails to serve
any or all of its customers, the provider of last resort shall offer
that customer the standard retail service package for that customer
class with no interruption of service to any customer.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 39.107. METERING AND BILLING SERVICES. (a) On

introduction of customer choice in a service area, metering services
for the area shall continue to be provided by the transmission and
distribution utility affiliate of the electric utility that was
serving the area before the introduction of customer choice.
Metering services provided to commercial and industrial customers
that are required by the independent system operator to have an
interval data recorder meter may be provided on a competitive basis.
(b) Metering services provided to residential customers and to
nonresidential customers other than those required by the independent
system operator to have an interval data recorder meter shall
continue to be provided by the transmission and distribution utility
affiliate of the electric utility that was serving the area before
the introduction of customer choice. Retail electric providers
serving residential and nonresidential customers other than those
required by the independent system operator to have an interval data
recorder meter may request that the transmission and distribution
utility provide specialized meters, meter features, or add-on
accessories so long as they are technically feasible and generally
available in the market and provided that the retail electric
provider pays the differential cost of such a meter or accessory.
Metering and billing services provided to residential customers shall
be governed by the customer safeguards adopted by the commission
under Section 39.101. All meter data, including all data generated,
provided, or otherwise made available, by advanced meters and meter

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information networks, shall belong to a customer, including data used

to calculate charges for service, historical load data, and any other
proprietary customer information. A customer may authorize its data
to be provided to one or more retail electric providers under rules
and charges established by the commission.
(c) Beginning on the date of introduction of customer choice in
a service area, tenants of leased or rented property that is
separately metered shall have the right to choose a retail electric
provider, an electric cooperative offering customer choice, or a
municipally owned utility offering customer choice, and the owner of
the property must grant reasonable and nondiscriminatory access to
transmission and distribution utilities, retail electric providers,
electric cooperatives, and municipally owned utilities for metering
purposes.
(d) Beginning on the date of introduction of customer choice in
a service area, a transmission and distribution utility, or an
electric cooperative or municipally owned utility providing the
customer's energy requirements shall bill a customer's retail
electric provider for nonbypassable delivery charges as determined
under Section 39.201. The retail electric provider or the electric
cooperative or municipally owned utility, as appropriate, must pay
these charges.
(e) A transmission and distribution utility may bill retail
customers at the request of a retail electric provider or, if an
electric cooperative or municipally owned utility is providing the
customer's energy requirements, at the request of the electric
cooperative or municipally owned utility. A transmission and
distribution utility that provides billing service on such request
shall offer billing service on comparable terms and conditions to
those of any such requesting retail electric provider or, as
applicable, the electric cooperative or municipally owned utility
providing energy requirements to a customer served by the
transmission and distribution utility.
(f) Beginning on the date of introduction of customer choice in
a service area, any charges for metering and billing services shall
comply with rules adopted by the commission relating to
nondiscriminatory rates of service.
(g) Metered electric service sold to residential customers on a
prepaid basis may not be sold at a price that is higher than the
price charged by the provider of last resort.

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(h) The commission shall establish a nonbypassable surcharge

for an electric utility or transmission and distribution utility to
use to recover reasonable and necessary costs incurred in deploying
advanced metering and meter information networks to residential
customers and nonresidential customers other than those required by
the independent system operator to have an interval data recorder
meter. The commission shall ensure that the nonbypassable surcharge
reflects a deployment of advanced meters that is no more than one-
third of the utility's total meters over each calendar year and shall
ensure that the nonbypassable surcharge does not result in the
utility recovering more than its actual, fully allocated meter and
meter information network costs. The expenses must be allocated to
the customer classes receiving the services, based on the electric
utility's most recently approved tariffs.
(i) Subject to the restrictions in Subsection (h), it is the
intent of the legislature that net metering and advanced meter
information networks be deployed as rapidly as possible to allow
customers to better manage energy use and control costs, and to
facilitate demand response initiatives.
(j) Notwithstanding Subsection (b), a nonresidential customer
may have a meter installed and metering services provided on a
competitive basis as part of an energy savings performance contract.
(k) The commission by rule shall prohibit an electric utility
or transmission and distribution utility from selling, sharing, or
disclosing information generated, provided, or otherwise collected
from an advanced metering system or meter information network,
including information used to calculate charges for service,
historical load data, and any other customer information. The
commission shall allow an electric utility or transmission and
distribution utility to share information with an affiliated
corporation, or other third-party entity, if the information is to be
used only for the purpose of providing electric utility service to
the customer or other customer-approved services.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.
Amended by:
Acts 2005, 79th Leg., Ch. 1095 (H.B. 2129), Sec. 7, eff.
September 1, 2005.
Acts 2007, 80th Leg., R.S., Ch. 527 (S.B. 831), Sec. 10, eff.
June 16, 2007.

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Acts 2007, 80th Leg., R.S., Ch. 939 (H.B. 3693), Sec. 20, eff.
September 1, 2007.
Acts 2009, 81st Leg., R.S., Ch. 87 (S.B. 1969), Sec. 27.001(110),
eff. September 1, 2009.
Acts 2013, 83rd Leg., R.S., Ch. 170 (H.B. 1600), Sec. 1.07, eff.
September 1, 2013.

Sec. 39.108. CONTRACTUAL OBLIGATIONS. This chapter may not:

(1) interfere with or abrogate the rights or obligations of
any party, including a retail or wholesale customer, to a contract
with an investor-owned electric utility, river authority, municipally
owned utility, or electric cooperative;
(2) interfere with or abrogate the rights or obligations of
a party under a contract or agreement concerning certificated utility
service areas; or
(3) result in a change in wholesale power costs to
wholesale customers in Texas purchasing electricity under wholesale
power contracts the pricing provisions of which are based on
formulary rates, fuel adjustments, or average system costs.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 39.109. NEW OWNER OR SUCCESSOR. (a) To ensure the

continued safe and reliable operation of electric generating
facilities, the commission shall require a generating facility that
is transferred to a new owner or successor in interest between June
1, 1999, and January 1, 2002, to continue to be operated and
maintained by the same operating personnel for not less than two
years, except that the personnel may be dismissed for cause.
(b) This section shall apply only if the facility is actually
operated during the two-year period after the sale.
(c) This section shall not require that the purchaser cause the
facility to be operated in whole or in part, nor shall it preclude a
temporary closure of the facility during the two-year period.
(d) This section shall not create any obligation extending
after the two-year period following the sale.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

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Sec. 39.110. WHOLESALE INDEXED PRODUCTS PROHIBITED. (a) In

this section, "wholesale indexed product" means a retail electric
product in which the price a customer pays for electricity includes a
direct pass-through of real-time settlement point prices determined
by the independent organization certified under Section 39.151 for
the ERCOT power region.
(b) An aggregator, a broker, or a retail electric provider may
not offer a wholesale indexed product to a residential or small
commercial customer.
(c) An aggregator, a broker, or a retail electric provider may
enroll a customer other than a residential and small commercial
customer in a wholesale indexed product only if the provider,
aggregator, or broker obtains before the customer's enrollment an
acknowledgment signed by the customer that the customer accepts the
potential price risks associated with a wholesale indexed product.
(d) An acknowledgment required by Subsection (c) must include
the following statement, in clear, boldfaced text:
"I understand that the volatility and fluctuation of
wholesale energy pricing may cause my energy bill to be
multiple times higher in a month in which wholesale energy
prices are high. I understand that I will be responsible
for charges caused by fluctuations in wholesale energy
prices."
(e) An acknowledgment required by Subsection (c) may be
included as an addendum to a contract.
(f) A retail electric provider that provides a wholesale
indexed product to a customer must keep on file the acknowledgment
required by Subsection (c) for each customer while the customer is
enrolled with the retail electric provider in the wholesale indexed
product.

Added by Acts 2021, 87th Leg., R.S., Ch. 132 (H.B. 16), Sec. 1, eff.
September 1, 2021.

Sec. 39.112. NOTICE OF EXPIRATION AND PRICE CHANGE. (a) In

this section, "fixed rate product" means a retail electric product
with a term of at least three months for which the price for each
billing period, including recurring charges, does not change
throughout the term of the contract, except that the price may vary

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to reflect actual changes in transmission and distribution utility

charges, changes to ERCOT or Texas Regional Entity administrative
fees charged to loads, or changes to federal, state, or local laws
that result in new or modified fees or costs that are not within the
retail electric provider's control.
(b) A retail electric provider shall provide a residential
customer who has a fixed rate product with at least three written
notices of the date the fixed rate product will expire. The notices
must be provided during the last third of the contract period and in
intervals that allow for, as practicable, even distribution of the
notices throughout the last third of the contract period. The final
notice for a contract with a period of more than four months must be
provided at least 30 days before the date that the contract will
expire. The final notice for a contract with a period of less than
four months must be provided at least 15 days before the date that
the contract will expire.
(c) The retail electric provider must provide each notice
required by Subsection (b) to the customer by mail at the customer's
billing address, unless the customer has opted to receive
communications electronically from the retail electric provider.
(d) If the retail electric provider has access to customer
contact information that allows the provider to send the customer a
text message or call the customer, and the customer has agreed to
receive notices by text message or call, the retail electric provider
may provide additional notice to the customer by text message or call
of the date the fixed rate product will expire. Notice provided by
text message or call does not constitute notice under Subsection (b).
(e) A notice required by Subsection (b) must:
(1) for a notice provided by mail, include in a manner
visible from the outside of the envelope in which the notice is sent,
a statement that reads: "Contract Expiration Notice. See Enclosed.";
(2) if included with a customer's bill, be printed on a
separate page or included as a separate document;
(3) include a description of any fees or charges associated
with the early termination of the customer's fixed rate product; and
(4) describe any renewal offers the retail electric
provider chooses to make available to the customer and identify
methods by which the customer may obtain the contract documents for
each of the offered products.
(f) The final notice provided under Subsection (b) must include

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the pricing terms for the default renewal product required by

Subsection (h).
(g) A retail electric provider shall include on each billing
statement, in boldfaced and underlined text, the end date of the
fixed rate product.
(h) Except as provided by Subsection (j), if a customer does
not select another retail electric product before the expiration of
the customer's contract term with a retail electric provider, the
provider shall automatically serve the customer through a default
renewal product that the customer may cancel at any time without a
fee. The default renewal product must be:
(1) a month-to-month product in which the price the
customer pays for electricity may vary between billing cycles; and
(2) based on clear terms designed to be easily understood
by the average customer.
(i) A retail electric provider shall include in each contract
for service the terms of the default renewal product that the
customer will automatically be enrolled in under Subsection (h) if
the customer does not select another retail electric product before
the expiration of the contract term.
(j) If a retail electric provider does not provide notice of
the expiration of a customer's contract with the provider in
accordance with this section and the customer does not select another
retail electric product before the expiration of the customer's
contract term with the provider, the retail electric provider must
continue to serve the customer under the pricing terms of the fixed
rate product contract until:
(1) the provider provides notice of the expiration of the
contract in accordance with this section; or
(2) the customer selects another retail electric product.
(k) No provision in this section shall be construed to prohibit
the commission from adopting rules that would provide a greater
degree of customer protection.

Added by Acts 2009, 81st Leg., R.S., Ch. 648 (H.B. 1822), Sec. 5, eff.
September 1, 2009.
Amended by:
Acts 2021, 87th Leg., R.S., Ch. 132 (H.B. 16), Sec. 2, eff.
September 1, 2021.

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SUBCHAPTER D. MARKET STRUCTURE

Sec. 39.151. ESSENTIAL ORGANIZATIONS. (a) A power region must
establish one or more independent organizations to perform the
following functions:
(1) ensure access to the transmission and distribution
systems for all buyers and sellers of electricity on
nondiscriminatory terms;
(2) ensure the reliability and adequacy of the regional
electrical network;
(3) ensure that information relating to a customer's choice
of retail electric provider is conveyed in a timely manner to the
persons who need that information; and
(4) ensure that electricity production and delivery are
accurately accounted for among the generators and wholesale buyers
and sellers in the region.
(b) "Independent organization" means an independent system
operator or other person that is sufficiently independent of any
producer or seller of electricity that its decisions will not be
unduly influenced by any producer or seller.
(c) The commission shall certify an independent organization or
organizations to perform the functions prescribed by this section.
The commission shall apply the provisions of this section and
Sections 39.1511, 39.1512, and 39.1515 so as to avoid conflict with a
ruling of a federal regulatory body.
(d) The commission shall adopt and enforce rules relating to
the reliability of the regional electrical network and accounting for
the production and delivery of electricity among generators and all
other market participants, or may delegate those responsibilities to
an independent organization. An independent organization certified by
the commission is directly responsible and accountable to the
commission. The commission has complete authority to oversee and
investigate the independent organization's finances, budget, and
operations as necessary to ensure the organization's accountability
and to ensure that the organization adequately performs the
organization's functions and duties. The independent organization
shall fully cooperate with the commission in the commission's
oversight and investigatory functions. The commission may take
appropriate action against an independent organization that does not
adequately perform the organization's functions or duties or does not
comply with this section, including decertifying the organization or

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assessing an administrative penalty against the organization. The

commission by rule shall adopt procedures governing decertification
of an independent organization, selecting and certifying a successor
organization, and transferring assets to the successor organization
to ensure continuity of operations in the region. The commission may
not implement, by order or by rule, a requirement that is contrary to
an applicable federal law or rule.
(d-1) The commission shall require an independent organization
certified by the commission under this section to submit to the
commission the organization's entire proposed annual budget. The
commission shall review the proposed budgets either annually or
biennially and may approve, disapprove, or modify any item included
in a proposed budget. The commission by rule shall establish the
type of information or documents needed to effectively evaluate the
proposed budget and reasonable dates for the submission of that
information or those documents. The commission shall establish a
procedure to provide public notice of and public participation in the
budget review process.
(d-2) Except as otherwise agreed to by the commission and an
independent organization certified by the commission under this
section, the organization must submit to the commission for review
and approval proposals for obtaining debt financing or for
refinancing existing debt. The commission may approve, disapprove,
or modify a proposal.
(d-3) An independent organization certified by the commission
under this section shall develop proposed performance measures to
track the organization's operations. The independent organization
must submit the proposed performance measures to the commission for
review and approval. The commission shall review the organization's
performance as part of the budget review process under Subsection (d-
1). The commission shall prepare a report at the time the commission
approves the organization's budget detailing the organization's
performance and submit the report to the lieutenant governor, the
speaker of the house of representatives, and each house and senate
standing committee that has jurisdiction over electric utility
issues.
(d-4) The commission may:
(1) require an independent organization to provide reports
and information relating to the independent organization's
performance of the functions prescribed by this section and relating

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to the organization's revenues, expenses, and other financial

matters;
(2) prescribe a system of accounts for an independent
organization;
(3) conduct audits of an independent organization's
performance of the functions prescribed by this section or relating
to its revenues, expenses, and other financial matters and may
require an independent organization to conduct such an audit;
(4) inspect an independent organization's facilities,
records, and accounts during reasonable hours and after reasonable
notice to the independent organization;
(5) assess administrative penalties against an independent
organization that violates this title or a rule or order adopted by
the commission and, at the request of the commission, the attorney
general may apply for a court order to require an independent
organization to comply with commission rules and orders in the manner
provided by Chapter 15; and
(6) resolve disputes between an affected person and an
independent organization and adopt procedures for the efficient
resolution of such disputes.
(e) After approving the budget of an independent organization
under Subsection (d-1), the commission shall authorize the
organization to charge to wholesale buyers and sellers a system
administration fee, within a range determined by the commission, that
is reasonable and competitively neutral to fund the independent
organization's approved budget. The commission shall investigate the
organization's cost efficiencies, salaries and benefits, and use of
debt financing and may require the organization to provide any
information needed to effectively evaluate the reasonableness and
neutrality of the fee or to evaluate the effectiveness or efficiency
of the organization. The commission shall work with the organization
to establish the detail of information, both current and historical,
and the time frames the commission needs to effectively evaluate the
fee. The commission shall require the organization to closely match
actual revenues generated by the fee and other sources of revenue
with revenue necessary to fund the budget, taking into account the
effect of a fee change on market participants and consumers, to
ensure that the budget year does not end with surplus or insufficient
funds. The commission shall require the organization to submit to
the commission, on a schedule determined by the commission, reports

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that compare actual expenditures with budgeted expenditures.

(e-1) The review and approval of a proposed budget under
Subsection (d-1) or a proceeding to authorize and set the range for
the amount of a fee under Subsection (e) is not a contested case for
purposes of Chapter 2001, Government Code.
(f) In implementing this section, the commission may cooperate
with the utility regulatory commission of another state or the
federal government and may hold a joint hearing or make a joint
investigation with that commission.
(g) To maintain certification as an independent organization
for the ERCOT power region under this section, an organization's
governing body must be composed of persons selected by the ERCOT
board selection committee.
(g-1) The bylaws of an independent organization certified for
the ERCOT power region must be approved by and reflect the input of
the commission. The bylaws must require that every member of the
governing body be a resident of this state and must prohibit a
legislator from serving as a member. The governing body must be
composed of:
(1) two members of the commission as ex officio nonvoting
members:
(A) one of whom must be the presiding officer of the
commission; and
(B) one of whom must be designated by the presiding
officer of the commission to serve a one-year term on the governing
body;
(2) the counsellor as an ex officio voting member
representing residential and small commercial consumer interests;
(3) the chief executive officer of the independent
organization as an ex officio nonvoting member; and
(4) eight members selected by the selection committee under
Section 39.1513 with executive-level experience in any of the
following professions:
(A) finance;
(B) business;
(C) engineering, including electrical engineering;
(D) trading;
(E) risk management;
(F) law; or
(G) electric market design.

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(g-2) Members of the governing body are entitled to receive a

salary for their service.
(g-3) A person does not qualify for selection as a member of
the governing body of an independent organization for the ERCOT power
region if the person has a fiduciary duty or assets in the
electricity market for that region.
(g-4) To maintain certification as an independent organization
under this section, the organization's governing body may not include
more than two members who are employed by an institution of higher
education, as defined by Section 61.003, Education Code, in a
professorial role.
(g-5) A former member of the governing body of an independent
organization certified under this section may not, before the second
anniversary of the date the member ceases to be a member of the
governing body, engage in an activity that requires registration
under Chapter 305, Government Code.
(g-6) In this subsection, a reference to a protocol includes a
rule. Protocols adopted by an independent organization and
enforcement actions taken by the organization under delegated
authority from the commission are subject to commission oversight and
review and may not take effect before receiving commission approval.
To maintain certification as an independent organization under this
section, the organization's governing body must establish and
implement a formal process for adopting new protocols or revisions to
existing protocols. The process must require that new or revised
protocols may not take effect until the commission approves a market
impact statement describing the new or revised protocols. The
commission may approve, reject, or remand with suggested
modifications to the independent organization's governing body
protocols adopted by the organization.
Text of subsection as added by Acts 2023, 88th Leg., R.S., Ch. 464
(S.B. 2013), Sec. 4
(g-7) To maintain certification as an independent organization
under this section, the organization must:
(1) identify all employee positions in the organization
that are critical to the security of the electric grid; and
(2) before hiring a person for a position described by
Subdivision (1), obtain from the Department of Public Safety or a
private vendor criminal history record information relating to the
prospective employee and any other background information considered

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necessary by the independent organization or required by the

commission.
Text of subsection as added by Acts 2023, 88th Leg., R.S., Ch. 410
(H.B. 1500), Sec. 15
(g-7) The presiding officer of the commission shall designate
commissioners to serve terms on the independent organization's
governing body under Subsection (g-1)(1)(B) in the order in which the
commissioners were first appointed to the commission. A commissioner
may not serve an additional term until each commissioner has served a
term.
(h) The ERCOT independent system operator may meet the criteria
relating to the other functions of an independent organization
provided by Subsection (a) by adopting procedures and acquiring
resources needed to carry out those functions, consistent with any
rules or orders of the commission.
(i) The commission may delegate authority to the existing
independent system operator in ERCOT to enforce operating standards
within the ERCOT regional electrical network and to establish and
oversee transaction settlement procedures. The commission may
establish the terms and conditions for the ERCOT independent system
operator's authority to oversee utility dispatch functions after the
introduction of customer choice.
(j) A retail electric provider, municipally owned utility,
electric cooperative, power marketer, transmission and distribution
utility, or power generation company shall observe all scheduling,
operating, planning, reliability, and settlement policies, rules,
guidelines, and procedures established by the independent system
operator in ERCOT. Failure to comply with this subsection may result
in the revocation, suspension, or amendment of a certificate as
provided by Section 39.356 or in the imposition of an administrative
penalty as provided by Section 39.357.
(j-1) Notwithstanding Subsection (j) of this section, Section
39.653(c), or any other law, the independent system operator in the
ERCOT power region may not reduce payments to or uplift short-paid
amounts to a municipally owned utility that becomes subject to the
jurisdiction of that independent system operator on or after May 29,
2021, and before December 30, 2021, related to a default on a payment
obligation by a market participant that occurred before May 29, 2021.
(k) To the extent the commission has authority over an
independent organization outside of ERCOT, the commission may

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delegate authority to the independent organization consistent with

Subsection (i).
(l) No operational criteria, protocols, or other requirement
established by an independent organization, including the ERCOT
independent system operator, may adversely affect or impede any
manufacturing or other internal process operation associated with an
industrial generation facility, except to the minimum extent
necessary to assure reliability of the transmission network.
(m) A power region outside of ERCOT shall be deemed to have met
the requirement to establish an independent organization to perform
the transmission functions specified in Subsection (a) if the Federal
Energy Regulatory Commission has approved a regional transmission
organization for the region and found that the regional transmission
organization meets the requirements of Subsection (a).
(n) An independent organization certified by the commission
under this section is subject to review under Chapter 325, Government
Code (Texas Sunset Act), but is not abolished under that chapter.
The independent organization shall be reviewed during the periods in
which the Public Utility Commission of Texas is reviewed.
(o) An independent organization certified by the commission
under this section shall:
(1) conduct internal cybersecurity risk assessment,
vulnerability testing, and employee training to the extent the
independent organization is not otherwise required to do so under
applicable state and federal cybersecurity and information security
laws; and
(2) submit a report annually to the commission on the
independent organization's compliance with applicable cybersecurity
and information security laws.
(p) Information submitted in a report under Subsection (o) is
confidential and not subject to disclosure under Chapter 552,
Government Code.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.
Amended by:
Acts 2005, 79th Leg., Ch. 797 (S.B. 408), Sec. 9, eff. September
1, 2005.
Acts 2011, 82nd Leg., R.S., Ch. 1232 (S.B. 652), Sec. 1.09(a),
eff. June 17, 2011.
Acts 2013, 83rd Leg., R.S., Ch. 170 (H.B. 1600), Sec. 1.08, eff.

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September 1, 2013.
Acts 2019, 86th Leg., R.S., Ch. 509 (S.B. 64), Sec. 23, eff.
September 1, 2019.
Acts 2021, 87th Leg., R.S., Ch. 425 (S.B. 2), Sec. 3, eff. June
8, 2021.
Acts 2021, 87th Leg., R.S., Ch. 908 (H.B. 4492), Sec. 3, eff.
June 16, 2021.
Acts 2023, 88th Leg., R.S., Ch. 410 (H.B. 1500), Sec. 15, eff.
September 1, 2023.
Acts 2023, 88th Leg., R.S., Ch. 464 (S.B. 2013), Sec. 4, eff.
June 9, 2023.

Sec. 39.1511. PUBLIC MEETINGS OF THE GOVERNING BODY OF AN

INDEPENDENT ORGANIZATION. (a) Meetings of the governing body of an
independent organization certified under Section 39.151 and meetings
of a subcommittee that includes a member of the governing body must
be open to the public. The bylaws of the independent organization
and the rules of the commission may provide for the governing body or
subcommittee to enter into executive session closed to the public
only to address risk management or a matter that the independent
organization would be authorized to consider in a closed meeting if
the independent organization were governed under Chapter 551,
Government Code.
(a-1) An independent organization's governing body or a
subcommittee may adopt a policy allowing the governing body or
subcommittee to enter into an executive session closed to the public
and commissioners, including the commissioners serving as ex officio
nonvoting members, only to address a contested case, as defined by
Section 2001.003, Government Code, or a personnel matter that is
unrelated to members of the governing body.
(b) The bylaws of the independent organization and rules of the
commission must ensure that a person interested in the activities of
the independent organization has an opportunity to obtain at least
seven days' advance notice of meetings and the planned agendas of the
meetings and an opportunity to comment on matters under discussion at
the meetings. The bylaws and commission rules governing meetings of
the governing body may provide for a shorter period of advance notice
and for meetings by teleconference technology for governing body
meetings to take action on urgent matters. The bylaws and rules must

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require actions taken on short notice or at teleconference meetings

to be ratified at the governing body's next regular meeting. The
notice requirements may be met by a timely electronic posting on the
Internet.
(c) The commission shall ensure that an independent
organization certified under Section 39.151 makes publicly accessible
without charge live Internet video of all public meetings subject to
this section for viewing from an Internet website.

Added by Acts 2005, 79th Leg., Ch. 797 (S.B. 408), Sec. 10, eff.
September 1, 2005.
Amended by:
Acts 2009, 81st Leg., R.S., Ch. 400 (H.B. 1783), Sec. 2, eff.
September 1, 2009.
Acts 2023, 88th Leg., R.S., Ch. 410 (H.B. 1500), Sec. 16, eff.
September 1, 2023.

Sec. 39.1512. DISCLOSURE OF INTEREST IN MATTER BEFORE

INDEPENDENT ORGANIZATION'S GOVERNING BODY; PARTICIPATION IN DECISION.
(a) If a matter comes before the governing body of an independent
organization certified under Section 39.151 and a member has a direct
interest in that matter or is employed by or has a substantial
financial interest in a person who has a direct interest in that
matter, that member shall publicly disclose the fact of that interest
to the governing body at a public meeting of the body. The member
shall recuse himself or herself from the governing body's
deliberations and actions on the matter and may not vote on the
matter or otherwise participate in a governing body decision on the
matter.
(b) A disclosure made under Subsection (a) shall be entered in
the minutes of the meeting at which the disclosure is made.
(c) The fact that a member is recused from a vote or decision
by application of this section does not affect the existence of a
quorum.

Added by Acts 2005, 79th Leg., Ch. 797 (S.B. 408), Sec. 10, eff.
September 1, 2005.

Sec. 39.1513. ERCOT BOARD SELECTION COMMITTEE. (a) The ERCOT

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board selection committee is composed of:

(1) one member appointed by the governor;
(2) one member appointed by the lieutenant governor; and
(3) one member appointed by the speaker of the house of
representatives.
(b) A person may not be appointed as a member of the committee
unless the person is a resident of this state.
(c) A member of the committee is not entitled to compensation
for serving as a member but is entitled to reimbursement for actual
and necessary expenses incurred in performing the official duties of
office.
(d) The committee shall select members eligible under Section
39.151 to serve on the governing body of an independent organization
certified under that section for the ERCOT power region and shall
designate the chair and vice chair of the governing body from those
members.
(e) The ERCOT board selection committee shall retain an outside
consulting firm to help select members of the governing body under
Subsection (d).

Added by Acts 2021, 87th Leg., R.S., Ch. 425 (S.B. 2), Sec. 4, eff.
June 8, 2021.

Sec. 39.1514. COMMISSION DIRECTIVES TO INDEPENDENT

ORGANIZATION. (a) The commission may not use a verbal directive to
direct an independent organization certified under Section 39.151 to
take an official action. The commission may direct the organization
to take an official action only through:
(1) a contested case;
(2) rulemaking; or
(3) a memorandum or written order adopted by a majority
vote.
(a-1) The commission must use a contested case or rulemaking
process to direct an independent organization certified under Section
39.151 to take an official action that will create a new cost or fee,
increase an existing cost or fee, or impose significant operational
obligations on an entity.
(b) The commission by rule shall:
(1) specify the types of directives the commission may

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issue through a contested case, rulemaking, memorandum, or written

order, in accordance with Subsection (a-1);
(2) require that proposed commission directives be included
as an item on a commission meeting agenda and require the commission
to allow members of the public an opportunity to comment on the
agenda item; and
(3) establish a reasonable timeline for the release before
a commission meeting of discussion materials relevant to any
proposed commission directives included as agenda items for that
meeting.
(c) Notwithstanding another provision of this section, the
commission may use a verbal directive to direct an independent
organization to take an official action in an urgent or emergency
situation that poses an imminent threat to public health, public
safety, or the reliability of the power grid. If the commission uses
a verbal directive, the commission shall provide written
documentation of the directive to the independent organization not
later than 72 hours after the urgent or emergency situation ends.
The commission by rule shall establish criteria for determining
whether a situation is urgent or an emergency under this subsection
and establish a process by which the commission will issue directives
to the independent organization under this subsection.

Added by Acts 2023, 88th Leg., R.S., Ch. 410 (H.B. 1500), Sec. 17,
eff. September 1, 2023.

Sec. 39.1515. WHOLESALE ELECTRIC MARKET MONITOR. (a) An

independent organization certified under Section 39.151 shall
contract with an entity selected by the commission to act as the
commission's wholesale electric market monitor to detect and prevent
market manipulation strategies, recommend measures to enhance the
efficiency of the wholesale market, and provide independent analysis
of any material changes proposed to the wholesale market. The
commission may not restrict the market monitor from appearing or
speaking before or providing analysis to the legislature. The
independent organization may not substantially modify the market
monitor's contract unless the modification is approved by a majority
of the commissioners.
(b) The independent organization shall provide to the personnel

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of the market monitor:

(1) full access to the organization's main operations
center and the organization's records that concern operations,
settlement, and reliability; and
(2) other support and cooperation the commission determines
is necessary for the market monitor to perform the market monitor's
functions.
(c) The independent organization shall use money from the fee
authorized by Section 39.151(e) to pay for the market monitor's
activities.
(d) The commission is responsible for ensuring that the market
monitor has the resources, expertise, and authority necessary to
monitor the wholesale electric market effectively and shall adopt
rules and perform oversight of the market monitor as necessary. The
market monitor shall operate under the supervision and oversight of
the commission. The commission shall retain all enforcement
authority conferred under this title, and this section may not be
construed to confer enforcement authority on the market monitor or to
authorize the commission to delegate the commission's enforcement
authority to the market monitor. The commission by rule shall
define:
(1) the market monitor's monitoring responsibilities,
including reporting obligations and limitations;
(2) the standards for funding the market monitor, including
staffing requirements;
(3) qualifications for personnel of the market monitor; and
(4) ethical standards for the market monitor and the
personnel of the market monitor.
(e) In adopting rules governing the standards for funding the
market monitor, the commission shall consult with a subcommittee of
the independent organization's governing body to receive information
on how money is or should be spent for monitoring functions. Rules
governing ethical standards must include provisions designed to
ensure that the personnel of the market monitor are professionally
and financially independent from market participants. The commission
shall develop and implement policies that clearly separate the
policymaking responsibilities of the commission and the monitoring,
analysis, and reporting responsibilities of the market monitor.
(f) The market monitor immediately shall report in writing
directly to the commission and commission staff all potential market

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manipulations and all discovered or potential violations of

commission rules or rules of the independent organization.
(g) The personnel of the market monitor may communicate with
commission staff on any matter without restriction.
(h) The market monitor annually shall submit to the commission
and the independent organization a report that identifies market
design flaws and recommends methods to correct the flaws. The
commission and the independent organization shall review the report
and evaluate whether changes to rules of the commission or the
independent organization should be made.
(i) Not later than December 1 of each year, the commission
shall submit a report to the legislature that describes for the 12-
month period preceding the report's submission:
(1) the number of instances in which the market monitor
reported potential market manipulation to the commission or
commission staff;
(2) the statutes, commission rules, and rules of the
independent organization alleged to have been violated by the
reported entities; and
(3) the number of instances reported under Subdivision (1)
for which the commission instituted a formal investigation on its own
motion or commission staff initiated an enforcement action.

Added by Acts 2005, 79th Leg., Ch. 797 (S.B. 408), Sec. 10, eff.
September 1, 2005.
Amended by:
Acts 2013, 83rd Leg., R.S., Ch. 170 (H.B. 1600), Sec. 1.09, eff.
September 1, 2013.
Acts 2023, 88th Leg., R.S., Ch. 410 (H.B. 1500), Sec. 18, eff.
September 1, 2023.

Sec. 39.1516. CYBERSECURITY MONITOR. (a) In this section,

"monitored utility" means:
(1) a transmission and distribution utility;
(2) a corporation described in Section 32.053;
(3) a municipally owned utility or electric cooperative
that owns or operates equipment or facilities in the ERCOT power
region to transmit electricity at 60 or more kilovolts; or
(4) an electric utility, municipally owned utility, or

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electric cooperative that operates solely outside the ERCOT power

region that has elected to participate under Subsection (d).
(b) The commission and the independent organization certified
under Section 39.151 shall contract with an entity selected by the
commission to act as the commission's cybersecurity monitor to:
(1) manage a comprehensive cybersecurity outreach program
for monitored utilities;
(2) meet regularly with monitored utilities to discuss
emerging threats, best business practices, and training
opportunities;
(3) review self-assessments voluntarily disclosed by
monitored utilities of cybersecurity efforts;
(4) research and develop best business practices regarding
cybersecurity; and
(5) report to the commission on monitored utility
cybersecurity preparedness.
(c) The independent organization certified under Section 39.151
shall provide to the cybersecurity monitor any access, information,
support, and cooperation that the commission determines is necessary
for the monitor to perform the functions described by Subsection (b).
The independent organization shall use funds from the fee authorized
by Section 39.151(e) to pay for the cybersecurity monitor's
activities.
(d) An electric utility, municipally owned utility, or electric
cooperative that operates solely outside the ERCOT power region may
elect to participate in the cybersecurity monitor program or to
discontinue participation. The commission shall adopt rules
establishing:
(1) procedures for an electric utility, municipally owned
utility, or electric cooperative to notify the commission, the
independent organization certified under Section 39.151, and the
cybersecurity monitor that the utility or cooperative elects to
participate or to discontinue participation; and
(2) a mechanism to require an electric utility, municipally
owned utility, or electric cooperative that elects to participate to
contribute to the costs incurred by the independent organization
under this section.
(e) The cybersecurity monitor shall operate under the
supervision and oversight of the commission.
(f) The commission shall adopt rules as necessary to implement

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this section and may enforce the provisions of this section in the
manner provided by this title. This section does not grant
enforcement authority to the cybersecurity monitor or authorize the
commission to delegate the commission's enforcement authority to the
cybersecurity monitor. This section does not grant enforcement
authority to the commission beyond authority explicitly provided for
in this title.
(g) The staff of the cybersecurity monitor may communicate with
commission staff about any cybersecurity information without
restriction. Commission staff shall maintain the confidentiality of
the cybersecurity information. Notwithstanding any other law,
commission staff may not disclose information obtained under this
section in an open meeting or through a response to a public
information request.
(h) Information written, produced, collected, assembled, or
maintained under Subsection (b), (c), or (g) is confidential and not
subject to disclosure under Chapter 552, Government Code. A
governmental body is not required to conduct an open meeting under
Chapter 551, Government Code, to deliberate a matter described by
Subsection (b), (c), or (g).

Added by Acts 2019, 86th Leg., R.S., Ch. 610 (S.B. 936), Sec. 3, eff.
September 1, 2019.

Sec. 39.152. QUALIFYING POWER REGIONS. (a) The commission

shall certify a power region if:
(1) a sufficient number of interconnected utilities in the
power region fall under the operational control of an independent
organization as described by Section 39.151;
(2) the power region has a generally applicable tariff that
guarantees open and nondiscriminatory access for all users to
transmission and distribution facilities in the power region as
provided by Section 39.203; and
(3) no person owns and controls more than 20 percent of the
installed generation capacity located in or capable of delivering
electricity to a power region, as determined according to Section
39.154.
(b) In determining whether a power region not entirely within
the state meets the requirements of this section, the commission

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shall consider the extent to which the available transmission

facilities limit the delivery of electricity from generators located
outside the state to areas of the power region within the state.
(c) For a power region outside of ERCOT, the requirements of
Subsection (a)(2) shall be deemed to have been met if power
aggregating to approximately 50,000 megawatts can be delivered to the
portion of the power region that is in this state through the payment
of not more than one transmission tariff.
(d) For a power region outside of ERCOT, a power generation
company that is affiliated with an electric utility may elect to
demonstrate that it meets the requirements of Subsection (a)(3) by
showing that it does not own and control more than 20 percent of the
installed capacity in a geographic market that includes the power
region, using the guidelines, standards, and methods adopted by the
Federal Energy Regulatory Commission.
(e) In a power region outside of ERCOT, if customer choice is
introduced before the requirements of Subsection (a) are met, an
affiliated retail electric provider may not compete for retail
customers in any area of the power region that is within this state
and outside of the affiliated transmission and distribution utility's
certificated service area unless the affiliated power generation
company makes a commitment to maintain and does maintain rates that
are based on cost of service for any electric cooperative or
municipally owned utility that was a wholesale customer on January 1,
1999, and was purchasing power at rates that were based on cost of
service. This subsection requires a power generation company to sell
power at rates that are based on cost of service, notwithstanding the
expiration of a contract for that service, until the requirements of
Subsection (a) are met.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 39.153. CAPACITY AUCTION. (a) Each electric utility

subject to this section shall sell at auction, at least 60 days
before the date set for customer choice to begin, entitlements to at
least 15 percent of the electric utility's Texas jurisdictional
installed generation capacity. For the purposes of this section, the
term "electric utility" includes any affiliated power generation
company that is unbundled from the electric utility in accordance

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with Section 39.051, but does not include any entity owning less than
400 megawatts of installed generation capacity.
(b) The obligation to auction the entitlements shall continue
until the earlier of 60 months after the date customer choice is
introduced or the date the commission determines that 40 percent or
more of the electric power consumed by residential and small
commercial customers within the affiliated transmission and
distribution utility's certificated service area before the onset of
customer choice is provided by nonaffiliated retail electric
providers.
(c) An affiliate of the electric utility selling entitlements
in the auction required by this section may not purchase entitlements
from the affiliated electric utility at the auction. Entitlements
may only be purchased by entities lawfully able to sell electricity
in Texas.
(d) An electric utility may choose to auction additional
entitlements beyond those required by Subsection (a) or continue to
auction entitlements after the period required by Subsection (b) in
order to comply with Section 39.154.
(e) The commission shall adopt rules by December 31, 2000, that
define the scope of the capacity entitlements to be auctioned.
Entitlements may be auctioned in blocks of less than 15 percent. The
rules shall state the minimum amount of capacity that can be sold at
auction as an entitlement. At a minimum, the rules shall provide
that the entitlements:
(1) may be sold and purchased in periods of not less than
one month nor more than four years;
(2) may be resold to any lawful purchaser, except for a
retail electric provider affiliated with the electric utility that
originally auctioned the entitlement;
(3) include no possessory interest in the unit from which
the power is produced;
(4) include no obligations of a possessory owner of an
interest in the unit from which the power is produced; and
(5) give the purchaser the right to designate the dispatch
of the entitlement, subject to planned outages, outages beyond the
control of the utility operating the unit, and other considerations
subject to the oversight of the applicable independent organization.
(f) The commission shall adopt rules by December 31, 2000, that
prescribe the procedure for the auction of the entitlements. The

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rules shall include:

(1) a process for conducting the auction or auctions,
including who shall conduct it, how often it shall be conducted, and
how winning bidders shall be determined;
(2) a process for the electric utility to designate which
generation units or combination of units are offered for auction;
(3) a provision for the utility to establish an opening bid
price based on the electric utility's expected cost, with the
commission prescribing the means for determining the opening bid
price, which may not include return on equity; and
(4) a provision that allows a bidder to specify the
magnitude and term of the entitlement, subject to the conditions
established in Subsection (e).
(g) In adopting the process under Subsection (f)(2), the
commission shall consider the furtherance of the development of the
competitive market, the cost of transmission, physical constraints of
the transmission system, the proximity of the generation to load,
economic efficiency, and any other factors the commission finds
relevant. The process may provide for commission approval of the
designation before auction. The commission may consult with the
applicable independent organization to develop the process.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 39.154. LIMITATION OF OWNERSHIP OF INSTALLED CAPACITY.

(a) Beginning on the date of introduction of customer choice, a
power generation company may not own and control more than 20 percent
of the installed generation capacity located in, or capable of
delivering electricity to, a power region.
(b) In a power region not entirely within the state, the
commission may waive or modify the requirement in Subsection (a) on a
finding of good cause.
(c) In determining the percentage shares of installed
generation capacity under this section, the commission shall combine
capacity owned and controlled by a power generation company and any
entity that is affiliated with that power generation company within
the power region, reduced by the installed generation capacity of
those facilities that are made subject to capacity auctions under
Sections 39.153(a) and (d).

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(d) In this chapter, "installed generation capacity" means all

potentially marketable electric generation capacity, including the
capacity of:
(1) generating facilities that are connected with a
transmission or distribution system;
(2) generating facilities used to generate electricity for
consumption by the person owning or controlling the facility; and
(3) generating facilities that will be connected with a
transmission or distribution system and operating within 12 months.
(e) In determining the percentage shares of installed
generation capacity owned and controlled by a power generation
company under this section and Section 39.156, the commission shall,
for purposes of calculating the numerator, reduce the installed
generation capacity owned and controlled by that power generation
company by the installed generation capacity of any "grandfathered
facility" within an ozone nonattainment area as of September 1, 1999,
for which that power generation company has commenced complying or
made a binding commitment to comply with Section 39.264. This
subsection applies only to a power generation company that is
affiliated with an electric utility that owned and controlled more
than 27 percent of the installed generation capacity in the power
region on January 1, 1999.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 39.155. COMMISSION ASSESSMENT OF MARKET POWER. (a) Each

person, municipally owned utility, electric cooperative, and river
authority that owns generation facilities and offers electricity for
sale in this state shall report to the commission its installed
generation capacity, the total amount of capacity available for sale
to others, the total amount of capacity under contract to others, the
total amount of capacity dedicated to its own use, its annual
wholesale power sales in the state, its annual retail power sales in
the state, and any other information necessary for the commission to
assess market power or the development of a competitive retail market
in the state. The commission shall by rule prescribe the nature and
detail of the reporting requirements and shall administer those
reporting requirements in a manner that ensures the confidentiality
of competitively sensitive information.

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(b) Repealed by Acts 2023, 88th Leg., R.S., Ch. 410 (H.B. 1500
), Sec. 46(a)(3), eff. September 1, 2023.
(c) Before the date of introduction of customer choice in a
power region other than ERCOT, each electric utility owning
transmission and distribution facilities in that region shall submit
an annual report to the commission identifying existing and potential
transmission and distribution constraints and system needs in the
power region, alternatives for meeting system needs, and
recommendations for meeting system needs as directed by the
commission.
(d) In a qualifying power region, the report required by
Subsection (c) shall be submitted by the independent organization or
organizations having authority over the power region or discrete
areas thereof.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.
Amended by:
Acts 2023, 88th Leg., R.S., Ch. 410 (H.B. 1500), Sec. 19, eff.
September 1, 2023.
Acts 2023, 88th Leg., R.S., Ch. 410 (H.B. 1500), Sec. 46(a)(3),
eff. September 1, 2023.

Sec. 39.156. MARKET POWER MITIGATION PLAN. (a) In this

section, "market power mitigation plan" or "plan" means a written
proposal by an electric utility or a power generation company for
reducing its ownership and control of installed generation capacity
as required by Section 39.154.
(b) An electric utility or power generation company owning and
controlling more than 20 percent of the generation capacity located
in, or capable of delivering electricity to, a power region shall
file a market power mitigation plan with the commission not later
than December 1, 2000.
(c) The plan may provide for:
(1) the sale of generation assets to a nonaffiliated
person;
(2) the exchange of generation assets with a nonaffiliated
person located in a different power region;
(3) the auctioning of generation capacity entitlements as
part of a capacity auction required by Section 39.153;

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(4) the sale of the right to capacity to a nonaffiliated

person for at least four years; or
(5) any reasonable method of mitigation.
(d) For the purposes of this section, generation capacity shall
be net of the generation capacity subject to an auction under Section
39.153.
(e) The plan shall be in a form prescribed by the commission
and shall provide information the commission finds reasonably
necessary to evaluate the plan.
(f) The commission shall approve, modify, or reject a plan
within 180 days after the date of a filing under Subsection (b). The
commission may not modify a plan to require divestiture by the
electric utility or the power generation company.
(g) In reaching its determination under Subsection (f), the
commission shall consider:
(1) the degree to which the electric utility's or power
generation company's stranded costs, if any, are minimized;
(2) whether on disposition of the generation assets the
reasonable value is likely to be received;
(3) the effect of the plan on the electric utility's or
power generation company's federal income taxes;
(4) the effect of the plan on current and potential
competitors in the generation market; and
(5) whether the plan is consistent with the public
interest.
(h) An electric utility or power generation company with an
approved mitigation plan may request to amend or repeal its plan. On
a showing of good cause, the commission shall modify or repeal an
electric utility's or power generation company's mitigation plan.
(i) If an electric utility's or a power generation company's
market power mitigation plan is not approved before January 1 of the
year it is to take effect, the commission may order the electric
utility or power generation company to auction generation capacity
entitlements according to Section 39.153, subject to commission
approval, of any capacity exceeding the maximum allowable capacity
prescribed by Section 39.154 until the time a mitigation plan is
approved.
(j) An auction under Subsection (i) shall be held not later
than 60 days after the date the order is entered.

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Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 39.157. COMMISSION AUTHORITY TO ADDRESS MARKET POWER. (a)

The commission shall monitor market power associated with the
generation, transmission, distribution, and sale of electricity in
this state. On a finding that market power abuses or other
violations of this section are occurring, the commission shall
require reasonable mitigation of the market power by ordering the
construction of additional transmission or distribution facilities,
by seeking an injunction or civil penalties as necessary to eliminate
or to remedy the market power abuse or violation as authorized by
Chapter 15, by imposing an administrative penalty as authorized by
Chapter 15, by ordering the disgorgement of excess revenue as
authorized by Chapter 15, or by suspending, revoking, or amending a
certificate or registration as authorized by Section 39.356. Section
15.024(c) does not apply to an administrative penalty imposed under
this section. For purposes of this subchapter, market power abuses
are practices by persons possessing market power that are
unreasonably discriminatory or tend to unreasonably restrict, impair,
or reduce the level of competition, including practices that tie
unregulated products or services to regulated products or services or
unreasonably discriminate in the provision of regulated services.
For purposes of this section, "market power abuses" include predatory
pricing, withholding of production, precluding entry, and collusion.
A violation of the code of conduct provided by Subsection (d) that
materially impairs the ability of a person to compete in a
competitive market shall be deemed to be an abuse of market power.
The possession of a high market share in a market open to competition
may not, of itself, be deemed to be an abuse of market power;
however, this sentence shall not affect the application of state and
federal antitrust laws.
(b) Beginning on the date of introduction of customer choice, a
person that owns generation facilities may not own transmission or
distribution facilities in this state except for those facilities
necessary to interconnect a generation facility with the transmission
or distribution network, a facility not dedicated to public use, or a
facility otherwise excluded from the definition of "electric utility"
under Section 31.002. However, nothing in this chapter shall
prohibit a power generation company affiliated with a transmission

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and distribution utility from owning generation facilities.

(c) The commission shall monitor market shares of installed
capacity to ensure that the limitations in Section 39.154 are not
exceeded. If the commission finds that a person has violated a
limitation in Section 39.154, the commission shall order the person
to file, within 60 days of the date of the order, a market power
mitigation plan consistent with the requirements in Section 39.156.
(d) Not later than January 10, 2000, the commission shall adopt
rules and enforcement procedures to govern transactions or activities
between a transmission and distribution utility and its competitive
affiliates to avoid potential market power abuses and cross-
subsidizations between regulated and competitive activities both
during the transition to and after the introduction of competition.
Nothing in this subsection is intended to affect or modify the
obligations or duties relating to any rules or standards of conduct
that may apply to a utility or the utility's affiliates under orders
or regulations of the Federal Energy Regulatory Commission or the
Securities and Exchange Commission. A utility that is subject to
statutes or regulations in other states that conflict with a
provision of this section may petition the commission for a waiver of
the conflicting provision on a showing of good cause. The rules
adopted under this section shall ensure that:
(1) a utility makes any products and services, other than
corporate support services, that it provides to a competitive
affiliate available, contemporaneously and in the same manner, to the
competitive affiliate's competitors and applies its tariffs, prices,
terms, conditions, and discounts for those products and services in
the same manner to all similarly situated entities;
(2) a utility does not:
(A) give a competitive affiliate or a competitive
affiliate's customers any preferential advantage, access, or
treatment regarding services other than corporate support services;
or
(B) act in a manner that is discriminatory or
anticompetitive with respect to a nonaffiliated competitor of a
competitive affiliate;
(3) a utility providing electric transmission or
distribution services:
(A) provides those services on nondiscriminatory terms
and conditions;

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(B) does not establish as a condition for the provision

of those services the purchase of other goods or services from the
utility or the competitive affiliate; and
(C) does not provide competitive affiliates
preferential access to the utility's transmission and distribution
systems or to information about those systems;
(4) a utility does not release any proprietary customer
information to a competitive affiliate or any other entity, other
than an independent organization as defined by Section 39.151 or a
provider of corporate support services for the purposes of providing
the services, without obtaining prior verifiable authorization, as
determined from the commission, from the customer;
(5) a utility does not:
(A) communicate with a current or potential customer
about products or services offered by a competitive affiliate in a
manner that favors a competitive affiliate; or
(B) allow a competitive affiliate, before September 1,
2005, to use the utility's corporate name, trademark, brand, or logo
unless the competitive affiliate includes on employee business cards
and in its advertisements of specific services to existing or
potential residential or small commercial customers locating within
the utility's certificated service area a disclaimer that states,
"(Name of competitive affiliate) is not the same company as (name of
utility) and is not regulated by the Public Utility Commission of
Texas, and you do not have to buy (name of competitive affiliate)'s
products to continue to receive quality regulated services from (name
of utility).";
(6) a utility does not conduct joint advertising or
promotional activities with a competitive affiliate in a manner that
favors the competitive affiliate;
(7) a utility is a separate, independent entity from any
competitive affiliates and, except as provided by Subdivisions (8)
and (9), does not share employees, facilities, information, or other
resources, other than permissible corporate support services, with
those competitive affiliates unless the utility can prove to the
commission that the sharing will not compromise the public interest;
(8) a utility's office space is physically separated from
the office space of the utility's competitive affiliates by being
located in separate buildings or, if within the same building, by a
method such as having the offices on separate floors or with separate

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access, unless otherwise approved by the commission;

(9) a utility and a competitive affiliate:
(A) may, to the extent the utility implements adequate
safeguards precluding employees of a competitive affiliate from
gaining access to information in a manner inconsistent with
Subsection (g) or (i), share common officers and directors, property,
equipment, offices to the extent consistent with Subdivision (8),
credit, investment, or financing arrangements to the extent
consistent with Subdivision (17), computer systems, information
systems, and corporate support services; and
(B) are not required to enter into prior written
contracts or competitive solicitations for non-tariffed transactions
between the utility and the competitive affiliate, except that the
commission by rule may require the utility and the competitive
affiliate to enter into prior written contracts or competitive
solicitations for certain classes of transactions, other than
corporate support services, that have a per unit value of more than
$75,000 or that total more than $1 million;
(10) a utility does not temporarily assign, for less than
one year, employees engaged in transmission or distribution system
operations to a competitive affiliate unless the employee does not
have knowledge of information that is intended to be protected under
this section;
(11) a utility does not subsidize the business activities
of an affiliate with revenues from a regulated service;
(12) a utility and its affiliates fully allocate costs for
any shared services, corporate support services, and other items
described by Subdivisions (8) and (9);
(13) a utility and its affiliates keep separate books of
accounts and records and the commission may review records relating
to a transaction between a utility and an affiliate;
(14) assets transferred or services provided between a
utility and an affiliate, other than transfers that facilitate
unbundling under Section 39.051 or asset valuation under Section
39.262, are priced at a level that is fair and reasonable to the
customers of the utility and reflects the market value of the assets
or services or the utility's fully allocated cost to provide those
assets or services;
(15) regulated services that a utility provides on a
routine or recurring basis are included in a tariff that is subject

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to commission approval;
(16) each transaction between a utility and a competitive
affiliate is conducted at arm's length; and
(17) a utility does not allow an affiliate to obtain credit
under an arrangement that would include a specific pledge of assets
in the rate base of the utility or a pledge of cash reasonably
necessary for utility operations.
(e) The commission shall by rule establish a code of conduct
that must be observed by electric cooperatives and municipally owned
utilities and their affiliates to protect against anticompetitive
practices. The rules adopted by the commission under this subsection
shall be consistent with Chapters 40 and 41 and may not be more
restrictive than the rules adopted under Subsection (d).
(f) Following review of the annual report submitted to it under
Section 39.155(c), the commission shall determine whether specific
transmission or distribution constraints or bottlenecks within this
state give rise to market power in specific geographic markets in the
state. The commission, on a finding that specific transmission or
distribution constraints or bottlenecks within this state give rise
to market power, may order reasonable mitigation of that potential
market power by ordering, under Section 39.203(e), one or more
electric utilities or transmission and distribution utilities to
construct additional transmission or distribution capacity, or both,
subject to the certification provisions of this title.
(g) The sharing of corporate support services in accordance
with this section may not allow or provide a means for the transfer
of confidential information from a utility to an affiliate, create
the opportunity for preferential treatment or an unfair competitive
advantage, lead to customer confusion, or create significant
opportunities for cross-subsidization of affiliates.
(h) A utility or competitive affiliate may not circumvent the
provisions or the intent of the provisions of Subsection (d) by using
any utility affiliate to provide information, services, or subsidies
between the utility and a competitive affiliate.
(i) In this section:
(1) "Competitive affiliate" means an affiliate of a utility
that provides services or sells products in a competitive energy-
related market in this state, including telecommunications services,
to the extent those services are energy related.
(2) "Corporate support services" means services shared by a

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utility, its parent holding company, or a separate affiliate created

to perform corporate support services, with its affiliates of joint
corporate oversight, governance, support systems, and personnel.
Examples of services that may be shared, to the extent the services
comply with the requirements prescribed by Subsections (d) and (g),
include human resources, procurement, information technology,
regulatory services, administrative services, real estate services,
legal services, accounting, environmental services, research and
development, internal audit, community relations, corporate
communications, financial services, financial planning and management
support, corporate services, corporate secretary, lobbying, and
corporate planning. Examples of services that may not be shared
include engineering, purchasing of electric transmission,
transmission and distribution system operations, and marketing.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.
Amended by:
Acts 2011, 82nd Leg., R.S., Ch. 996 (H.B. 2133), Sec. 7, eff.
September 1, 2011.
Acts 2023, 88th Leg., R.S., Ch. 410 (H.B. 1500), Sec. 20, eff.
September 1, 2023.

Sec. 39.158. MERGERS AND CONSOLIDATIONS. (a) A power

generation company that offers electricity for sale in this state in
a power region open to customer choice and proposes a transaction to
merge, consolidate, or otherwise become affiliated with another power
generation company that offers electricity for sale in this state in
the same power region shall obtain the approval of the commission
before closing if the merged, consolidated, or affiliated entity
would own and control more than 10 percent of the total installed
generation capacity located in, or capable of delivering electricity
to, the power region.
(a-1) An approval required by Subsection (a) must be requested
at least 120 days before the date of the proposed closing of the
transaction.
(a-2) The commission shall approve a transaction described by
Subsection (a) unless the commission finds that the transaction
results in a violation of Section 39.154. If the commission finds
that the transaction as proposed would violate Section 39.154, the

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commission may condition approval of the transaction on adoption of

reasonable modifications to the transaction as prescribed by the
commission to mitigate potential market power abuses.
(a-3) If the commission does not issue an order consistent with
Subsection (a-2) before the 121st day after the date the commission
receives a request for approval under Subsection (a), the request is
considered approved by the commission.
(b) Nothing in this chapter shall be construed to confer
immunity from state or federal antitrust laws. This chapter is
intended to complement other state and federal antitrust provisions.
Therefore, antitrust remedies may also be sought in state or federal
court to remedy anticompetitive activities.
(c) This section may not be deemed to authorize commission
review or approval of transactions entered into between or among
municipally owned utilities, river authorities, special districts
created by law, or other political subdivisions, whether or not those
transactions may be characterized as mergers, consolidations, or
other affiliations, when the transaction is authorized or structured
under state law.
(d) Notwithstanding any other provision of this title, an
electric utility which, before the effective date of this chapter,
entered into a stipulation or agreement in support of approval of a
merger which was approved by the commission on or after January 1,
1996, requiring the utility to pass through to ratepayers the savings
resulting from the merger of that utility with another utility shall
continue to be bound by the terms of that stipulation or agreement.
The commission shall ensure that the pass-through of all merger
savings required under any such stipulation or agreement shall be
fully implemented during the freeze period and shall be reflected in
setting the price to beat for that utility.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.
Amended by:
Acts 2019, 86th Leg., R.S., Ch. 433 (S.B. 1211), Sec. 1, eff.
September 1, 2019.

Sec. 39.159. POWER REGION RELIABILITY AND DISPATCHABLE

GENERATION. (a) For the purposes of this section, a generation
facility is considered to be non-dispatchable if the facility's

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output is controlled primarily by forces outside of human control.

(b) The commission shall ensure that the independent
organization certified under Section 39.151 for the ERCOT power
region:
(1) establishes requirements to meet the reliability needs
of the power region;
(2) periodically, but at least annually, determines the
quantity and characteristics of ancillary or reliability services
necessary to ensure appropriate reliability during extreme heat and
extreme cold weather conditions and during times of low non-
dispatchable power production in the power region;
(3) procures ancillary or reliability services on a
competitive basis to ensure appropriate reliability during extreme
heat and extreme cold weather conditions and during times of low non-
dispatchable power production in the power region;
(4) develops appropriate qualification and performance
requirements for providing services under Subdivision (3), including
appropriate penalties for failure to provide the services; and
(5) sizes the services procured under Subdivision (3) to
prevent prolonged rotating outages due to net load variability in
high demand and low supply scenarios.
(c) The commission shall ensure that:
(1) resources that provide services under Subsection (b)
are dispatchable and able to meet continuous operating requirements
for the season in which the service is procured;
(2) winter resource capability qualifications for a service
described by Subsection (b) include on-site fuel storage, dual fuel
capability, or fuel supply arrangements to ensure winter performance
for several days; and
(3) summer resource capability qualifications for a service
described by Subsection (b) include facilities or procedures to
ensure operation under drought conditions.
(d) The commission shall require the independent organization
certified under Section 39.151 for the ERCOT power region to develop
and implement an ancillary services program to procure dispatchable
reliability reserve services on a day-ahead and real-time basis to
account for market uncertainty. Under the required program, the
independent organization shall:
(1) determine the quantity of services necessary based on
historical variations in generation availability for each season

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based on a targeted reliability standard or goal, including

intermittency of non-dispatchable generation facilities and forced
outage rates, for dispatchable generation facilities;
(2) develop criteria for resource participation that
require a resource to:
(A) be capable of running for at least four hours at
the resource's high sustained limit;
(B) be online and dispatchable not more than two hours
after being called on for deployment; and
(C) have the dispatchable flexibility to address inter-
hour operational challenges; and
(3) reduce the amount of reliability unit commitment by the
amount of dispatchable reliability reserve services procured under
this section.
(e) Notwithstanding Subsection (d)(2)(A), the independent
organization certified under Section 39.151 for the ERCOT power
region may require a resource to be capable of running for more than
four hours as the organization determines is needed.

Added by Acts 2021, 87th Leg., R.S., Ch. 426 (S.B. 3), Sec. 18, eff.
June 8, 2021.
Amended by:
Acts 2023, 88th Leg., R.S., Ch. 410 (H.B. 1500), Sec. 21, eff.
September 1, 2023.
Acts 2023, 88th Leg., R.S., Ch. 410 (H.B. 1500), Sec. 22, eff.
September 1, 2023.

Sec. 39.1591. REPORT ON DISPATCHABLE AND NON-DISPATCHABLE

GENERATION FACILITIES. Not later than December 1 of each year, the
commission shall file a report with the legislature that:
(1) includes:
(A) the estimated annual costs incurred by load-serving
entities under this subchapter associated with backing up
dispatchable and non-dispatchable electric generation facilities to
guarantee that a firm amount of electric energy will be available to
the ERCOT power grid; and
(B) as calculated by the independent system operator,
the cumulative annual costs that have been incurred in the ERCOT
market to facilitate the transmission of dispatchable and non-

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dispatchable electricity to load and to interconnect transmission

level loads, including a statement of the total cumulative annual
costs and of the cumulative annual costs incurred for each type of
activity described by this paragraph; and
(2) documents the status of the implementation of this
subchapter, including whether the rules and protocols adopted to
implement this subchapter have materially improved the reliability,
resilience, and transparency of the electricity market.

Added by Acts 2023, 88th Leg., R.S., Ch. 410 (H.B. 1500), Sec. 23,
eff. September 1, 2023.

Sec. 39.1592. GENERATION RELIABILITY REQUIREMENTS. (a) This

section applies only to an electric generation facility in the ERCOT
power region for which a standard generator interconnection agreement
is signed on or after January 1, 2027, that has been in operation for
at least one year, and that is not a self-generator.
(b) Not later than December 1 of each year, an owner or
operator of an electric generation facility, other than a battery
energy storage resource, shall demonstrate to the commission the
ability of the owner or operator's portfolio to operate or be
available to operate when called on for dispatch at or above the
seasonal average generation capability during the times of highest
reliability risk, as determined by the commission, due to low
operation reserves, as determined by the commission. The owner or
operator must be allowed to meet the performance requirements
described by this subsection by supplementing or contracting with on-
site or off-site resources, including battery energy storage
resources. The commission shall determine the average generation
capability based on expected resource availability and seasonal-rated
capacity on a standalone basis.
(c) The commission shall require the independent organization
certified under Section 39.151 for the ERCOT power region to:
(1) enforce the requirements of Subsection (b) by imposing
financial penalties, as determined by the commission, for failing to
comply with the performance requirements described by that
subsection; and
(2) provide financial incentives, as determined by the
commission, for exceeding the performance requirements described by

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that subsection.
(d) The independent organization certified under Section 39.151
for the ERCOT power region may not impose penalties under Subsection
(c):
(1) for resource unavailability due to planned maintenance
outages or transmission outages;
(2) on resources that are already subject to performance
obligations during the highest reliability risk hours under the day-
ahead market rules or other ancillary or reliability services
established by the commission or the independent organization; or
(3) during hours outside a baseline established by the
commission that includes morning and evening ramping periods.

Added by Acts 2023, 88th Leg., R.S., Ch. 410 (H.B. 1500), Sec. 23,
eff. September 1, 2023.

Sec. 39.1593. COST ALLOCATION OF RELIABILITY SERVICES. (a)

The commission shall direct the independent organization certified
under Section 39.151 for the ERCOT power region to evaluate with
input from a technical advisory committee established under the
bylaws of the independent organization that includes market
participants whether allocating the costs of ancillary and
reliability services, including those procured under Section 39.159,
as added by Chapter 426 (S.B. 3), Acts of the 87th Legislature,
Regular Session, 2021, using a methodology described by Subsection
(b) would result in a net savings to consumers in the ERCOT power
region compared to allocating all costs of ancillary and reliability
services to load to ensure reliability.
(b) The commission shall evaluate whether to allocate the cost
of ancillary and reliability services:
(1) on a semiannual basis among electric generation
facilities and load-serving entities in proportion to their
contribution to unreliability during the times of highest reliability
risk due to low operating reserves by season, as determined by the
commission based on a number of hours adopted by the commission for
that season; or
(2) using another method identified by the commission.
(c) The evaluation must:
(1) use historical ancillary and reliability services data;

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(2) consider the causes for ancillary services deployments;

and
(3) consider the design, procurement, and cost allocation
of ancillary services required by Section 35.004(h).
(d) Not later than December 1, 2026, the commission shall
submit a report on the evaluation to the legislature.

Added by Acts 2023, 88th Leg., R.S., Ch. 410 (H.B. 1500), Sec. 23,
eff. September 1, 2023.

Sec. 39.1594. RELIABILITY PROGRAM. (a) Under Section

39.159(b), as added by Chapter 426 (S.B. 3), Acts of the 87th
Legislature, Regular Session, 2021, or other law, the commission may
not require retail customers or load-serving entities in the ERCOT
power region to purchase credits designed to support a required
reserve margin or other capacity or reliability requirement unless
the commission ensures that:
(1) the net cost to the ERCOT market of the credits does
not exceed $1 billion annually, less the cost of any interim or
bridge solutions that are lawfully implemented, except that the
commission may adjust the limit:
(A) proportionally according to the highest net peak
demand year-over-year with a base year of 2026; and
(B) for inflation with a base year of 2026;
(2) credits are available only for dispatchable generation;
(3) the independent organization certified under Section
39.151 for the ERCOT power region is required to procure the credits
centrally in a manner designed to prevent market manipulation by
affiliated generation and retail companies;
(4) a generator cannot receive credits that exceed the
amount of generation bid into the forward market by that generator;
(5) an electric generating unit can receive a credit only
for being available to perform in real time during the tightest
intervals of low supply and high demand on the grid, as defined by
the commission on a seasonal basis;
(6) a penalty structure is established, resulting in a net
benefit to load, for generators that bid into the forward market but
do not meet the full obligation;
(7) any program reliability standard reasonably balances

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the incremental reliability benefits to customers against the

incremental costs of the program based on an evaluation by the
wholesale electric market monitor;
(8) a single ERCOT-wide clearing price is established for
the program and does not differentiate payments or credit values
based on locational constraints;
(9) any market changes implemented as a bridge solution for
the program are removed not later than the first anniversary of the
date the program was implemented;
(10) the independent organization certified under Section
39.151 for the ERCOT power region begins implementing real time co-
optimization of energy and ancillary services in the ERCOT wholesale
market before the program is implemented;
(11) all elements of the program are initially implemented
on a single starting date;
(12) the terms of the program and any associated market
rules do not assign costs, credit, or collateral for the program in a
manner that provides a cost advantage to load-serving entities who
own, or whose affiliates own, generation facilities;
(13) secured financial credit and collateral requirements
are adopted for the program to ensure that other market participants
do not bear the risk of nonperformance or nonpayment; and
(14) the wholesale electric market monitor has the
authority and necessary resources to investigate potential instances
of market manipulation by program participants, including financial
and physical actions, and recommend penalties to the commission.
(b) This section does not require the commission to adopt a
reliability program that requires an entity to purchase capacity
credits.
(c) The commission and the independent organization certified
under Section 39.151 for the ERCOT power region shall consider
comments and recommendations from a technical advisory committee
established under the bylaws of the independent organization that
includes market participants when adopting and implementing a program
described by Subsection (a), if any.
(d) Before the commission adopts a program described by
Subsection (a), the commission shall require the independent
organization certified under Section 39.151 for the ERCOT power
region and the wholesale electric market monitor to complete an
updated assessment on the cost to and effects on the ERCOT market of

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the proposed reliability program and submit to the commission and the
legislature a report on the costs and benefits of continuing the
program. The assessment must include:
(1) an evaluation of the cost of new entry and the effects
of the proposed reliability program on consumer costs and the
competitive retail market;
(2) a compilation of detailed information regarding cost
offsets realized through a reduction in costs in the energy and
ancillary services markets and use of reliability unit commitments;
(3) a set of metrics to measure the effects of the proposed
reliability program on system reliability;
(4) an evaluation of the cost to retain existing
dispatchable resources in the ERCOT power region;
(5) an evaluation of the planned timeline for
implementation of real time co-optimization for energy and ancillary
services in the ERCOT power region; and
(6) anticipated market and reliability effects of new and
updated ancillary service products.
(e) If the commission adopts a program described by Subsection
(a), the commission by rule shall prohibit a generator that receives
credits through the program for a dispatchable electric generating
unit operated by the generator from decommissioning or removing from
service that unit while the generator participates in the program
unless the decommissioning or removal from service begins after
September 1, 2028, or the commission finds that the decommissioning
or removal from service:
(1) is required by or is a result of federal law; or
(2) would alleviate significant financial hardship for the
generator.
(f) If the commission adopts a program described by Subsection
(a), the wholesale electric market monitor described by Section
39.1515 biennially shall:
(1) evaluate the incremental reliability benefits of the
program for consumers compared to the costs to consumers of the
program and the costs in the energy and ancillary services markets;
and
(2) report the results of each evaluation to the
legislature.

Added by Acts 2023, 88th Leg., R.S., Ch. 410 (H.B. 1500), Sec. 23,

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eff. September 1, 2023.

Sec. 39.1595. GRID RELIABILITY LEGISLATIVE OVERSIGHT COMMITTEE.

(a) In this section, "committee" means the Grid Reliability
Legislative Oversight Committee established under this section.
(b) The Grid Reliability Legislative Oversight Committee is
created to oversee the commission's implementation of legislation
related to the regulation of the electricity market in this state
enacted by the 87th and 88th Legislatures.
(c) The committee is composed of eight members as follows:
(1) three members of the senate, appointed by the
lieutenant governor;
(2) three members of the house of representatives,
appointed by the speaker of the house of representatives;
(3) the chair of the committee of the senate having primary
jurisdiction over matters relating to the generation of electricity;
and
(4) the chair of the committee of the house having primary
jurisdiction over matters relating to the generation of electricity.
(d) An appointed member of the committee serves at the pleasure
of the appointing official.
(e) The committee members described by Subsections (c)(3) and
(4) serve as presiding co-chairs.
(f) A member of the committee may not receive compensation for
serving on the committee but is entitled to reimbursement for travel
expenses incurred by the member while conducting the business of the
committee as provided by the General Appropriations Act.
(g) The committee shall meet at least twice each year at the
call of either co-chair and shall meet at other times at the call of
either co-chair, as that officer determines appropriate.
(h) Chapter 551, Government Code, applies to the committee.

Added by Acts 2023, 88th Leg., R.S., Ch. 410 (H.B. 1500), Sec. 23,
eff. September 1, 2023.

Text of section as added by Acts 2021, 87th Leg., R.S., Ch. 426 (S.B.
3), Sec. 18
For text of section as added by Acts 2021, 87th Leg., R.S., Ch. 950

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(S.B. 1580), Sec. 3, see other Sec. 39.160.

Sec. 39.160. WHOLESALE PRICING PROCEDURES. (a) The commission
by rule shall establish an emergency pricing program for the
wholesale electric market.
(b) The emergency pricing program must take effect if the high
system-wide offer cap has been in effect for 12 hours in a 24-hour
period after initially reaching the high system-wide offer cap. The
commission by rule shall determine the criteria for the emergency
pricing program to cease.
(c) The emergency pricing program may not allow an emergency
pricing program cap to exceed any nonemergency high system-wide offer
cap.
(d) The commission by rule shall establish an ancillary
services cap to be in effect during the period an emergency pricing
program is in effect.
(e) Any wholesale pricing procedure that has a low system-wide
offer cap may not allow the low system-wide offer cap to exceed the
high system-wide offer cap.
(f) The commission shall review each system-wide offer cap
program adopted by the commission, including the emergency pricing
program, at least once every five years to determine whether to
update aspects of the program.
(g) The emergency pricing program must allow generators to be
reimbursed for reasonable, verifiable operating costs that exceed the
emergency cap.

Added by Acts 2021, 87th Leg., R.S., Ch. 426 (S.B. 3), Sec. 18, eff.
June 8, 2021.

Sec. 39.161. CHARGES FOR CERTAIN MARKET PARTICIPANTS.

Notwithstanding any other law, no default or uplift charge or
repayment may be allocated to or collected from a market participant
that:
(1) otherwise would be subject to an uplift charge solely
as a result of acting as a central counterparty clearinghouse in
wholesale market transactions in the ERCOT power region; and
(2) is regulated as a derivatives clearing organization, as
defined by the Commodity Exchange Act (7 U.S.C. Section 1a).

Added by Acts 2021, 87th Leg., R.S., Ch. 950 (S.B. 1580), Sec. 3, eff.

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June 18, 2021.

Redesignated from Utilities Code, Section 39.159 by Acts 2023, 88th
Leg., R.S., Ch. 768 (H.B. 4595), Sec. 22.003(b), eff. September 1,
2023.

Sec. 39.162. DEFAULT OF MARKET PARTICIPANT. (a) The commission

shall require that all market participants pay or make provision for
the full and prompt payment of amounts owed calculated solely
according to the protocols in effect during the period of emergency
to the independent organization certified under Section 39.151 for
the ERCOT power region to qualify, or to continue to qualify, as a
market participant in the ERCOT power region.
(b) If a market participant has failed to fully repay all
amounts calculated solely under the protocols in effect during the
period of emergency of the independent organization certified under
Section 39.151 for the ERCOT power region, the independent
organization shall report the market participant as in default to the
commission. The commission may not allow the independent
organization to accept the defaulting market participant's loads or
generation for scheduling in the ERCOT power region, or allow the
defaulting market participant to be a market participant in the ERCOT
power region for any purpose, until all amounts owed to the
independent organization by the market participant as calculated
under the protocols are paid in full.
(c) The commission and the independent organization certified
under Section 39.151 for the ERCOT power region shall pursue
collection in full of amounts owed to the independent organization by
the defaulting market participant.

Added by Acts 2021, 87th Leg., R.S., Ch. 950 (S.B. 1580), Sec. 3, eff.
June 18, 2021.
Redesignated from Utilities Code, Section 39.160 by Acts 2023, 88th
Leg., R.S., Ch. 768 (H.B. 4595), Sec. 22.003(b), eff. September 1,
2023.

Sec. 39.163. AMOUNTS OWED TO INDEPENDENT ORGANIZATION BY MARKET

PARTICIPANTS. (a) The commission shall require that all market
participants fully and promptly pay to the independent organization

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certified under Section 39.151 for the ERCOT power region all amounts
owed to the independent organization, or provide for the full and
prompt payment of those amounts owed, which must be calculated
solely according to the protocols of the independent organization in
effect during the period of emergency and subject to the jurisdiction
of the commission, to qualify, or to continue to qualify, as a market
participant in the ERCOT power region.
(b) The independent organization shall report to the commission
that a market participant is in default for the failure to pay, or
provide for the full and prompt payment of, all amounts owed to the
independent organization as calculated in accordance with this
section. The commission may not allow the defaulting market
participant to continue to be a market participant in the ERCOT power
region for any purpose or allow the independent organization to
accept the defaulting market participant's loads or generation for
scheduling in the ERCOT power region until all amounts owed to the
independent organization by the market participant as calculated in
this section are fully paid.
(c) The commission and the independent organization shall
pursue collection in full of amounts owed to the independent
organization by any market participant to reduce the costs that would
otherwise be borne by other market participants or their customers.

Added by Acts 2021, 87th Leg., R.S., Ch. 908 (H.B. 4492), Sec. 4, eff.
June 16, 2021.
Redesignated from Utilities Code, Section 39.159 by Acts 2023, 88th
Leg., R.S., Ch. 768 (H.B. 4595), Sec. 22.003(c), eff. September 1,
2023.

Sec. 39.164. AUDIT OF INDEPENDENT ORGANIZATION CERTIFIED FOR

ERCOT POWER REGION. (a) The commission annually shall have an
independent audit made of each independent organization certified
under Section 39.151 for the ERCOT power region.
(b) An audit under this section must examine:
(1) the independent organization's financial condition,
including the organization's budget and expenses, and the salaries of
the organization's employees and board members; and
(2) compliance of the independent organization's assets
with all applicable commission standards.

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(c) Not later than the 60th day after the date an audit under
this section is completed the commission shall:
(1) publish the results of the audit on the commission's
Internet website; and
(2) submit the results of the audit to the state auditor
and members of the standing committees of the legislature with
primary jurisdiction over the commission.

Added by Acts 2021, 87th Leg., R.S., Ch. 73 (H.B. 2586), Sec. 1, eff.
September 1, 2021.
Redesignated from Utilities Code, Section 39.159 by Acts 2023, 88th
Leg., R.S., Ch. 768 (H.B. 4595), Sec. 22.003(d), eff. September 1,
2023.

Sec. 39.165. GRID RELIABILITY ASSESSMENT. (a) The independent

organization certified under Section 39.151 for the ERCOT power
region shall conduct a biennial assessment of the ERCOT power grid to
assess the grid's reliability in extreme weather scenarios.
(b) Each assessment must:
(1) consider the impact of different levels of thermal and
renewable generation availability; and
(2) recommend transmission projects that may increase the
grid's reliability in extreme weather scenarios.

Added by Acts 2021, 87th Leg., R.S., Ch. 876 (S.B. 1281), Sec. 3, eff.
September 1, 2021.
Redesignated from Utilities Code, Section 39.159 by Acts 2023, 88th
Leg., R.S., Ch. 768 (H.B. 4595), Sec. 22.003(e), eff. September 1,
2023.

Text of section as added by Acts 2023, 88th Leg., R.S., Ch. 892 (H.B.
5066), Sec. 3
For text of section as added by Acts 2023, 88th Leg., R.S., Ch. 410
(H.B. 1500), Sec. 24(b), see other Sec. 39.166.
Sec. 39.166. RELIABILITY PLAN FOR REGIONS WITH RAPID ELECTRICAL
LOAD GROWTH. (a) The commission shall direct the independent
organization certified under Section 39.151 for the ERCOT power
region to:

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(1) identify each region in which transmission capacity is

insufficient to meet the region's existing and forecasted electrical
load, as reasonably determined by the certificated transmission
service provider; and
(2) develop a reliability plan to serve existing and
forecasted electrical load in the identified region.
(b) The commission shall develop a plan to implement each
reliability plan adopted under Subsection (a) to ensure timely
development and approval of necessary transmission service
improvements.

Added by Acts 2023, 88th Leg., R.S., Ch. 892 (H.B. 5066), Sec. 3, eff.
June 13, 2023.

Text of section as added by Acts 2023, 88th Leg., R.S., Ch. 410 (H.B.
1500), Sec. 24
For text of section as added by Acts 2023, 88th Leg., R.S., Ch. 892
(H.B. 5066), Sec. 3, see other Sec. 39.166.
Sec. 39.166. ELECTRIC INDUSTRY REPORT. (a) Not later than
January 15 of each odd-numbered year, the commission, in consultation
with the independent organization certified under Section 39.151 for
the ERCOT power region, shall prepare and submit to the legislature
an electric industry report.
(b) Each electric industry report submitted under this section
must:
(1) identify existing and potential transmission and
distribution constraints and system needs within the ERCOT power
region, alternatives for meeting system needs, and recommendations
for meeting system needs;
(2) summarize key findings from:
(A) the grid reliability assessment conducted under
Section 39.165; and
(B) the report required by Section 39.9112;
(3) outline basic information regarding the electric grid
and market in this state, including generation capacity, customer
demand, and transmission capacity currently installed on the grid and
projected in the future; and
(4) be presented in plain language that is readily
understandable by a person with limited knowledge of the electric

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industry.

Added by Acts 2023, 88th Leg., R.S., Ch. 410 (H.B. 1500), Sec. 24(b),
eff. September 1, 2023.

Text of section as added by Acts 2023, 88th Leg., R.S., Ch. 892 (H.B.
5066), Sec. 3
For text of section as added by Acts 2023, 88th Leg., R.S., Ch. 410
(H.B. 1500), Sec. 24(b), see other Sec. 39.167.
For expiration of this section, see Subsection (c).
Sec. 39.167. RELIABILITY PLAN FOR PERMIAN BASIN. (a) Not later
than January 30, 2024, the commission shall direct the independent
organization certified under Section 39.151 for the ERCOT power
region to develop a reliability plan under Section 39.166 for the
Permian Basin region.
(b) The plan must:
(1) address extending transmission service to areas where
mineral resources have been found;
(2) address increasing available capacity to meet
forecasted load; and
(3) provide available infrastructure to reduce
interconnection times in areas without access to transmission
service.
(c) This section expires September 1, 2025.

Added by Acts 2023, 88th Leg., R.S., Ch. 892 (H.B. 5066), Sec. 3, eff.
June 13, 2023.

Text of section as added by Acts 2023, 88th Leg., R.S., Ch. 410 (H.B.
1500), Sec. 24
For text of section as added by Acts 2023, 88th Leg., R.S., Ch. 892
(H.B. 5066), Sec. 3, see other Sec. 39.167.
Sec. 39.167. CONFLICTS OF INTEREST REPORT. The commission and
the independent organization certified under Section 39.151 for the
ERCOT power region annually shall review statutes, rules, protocols,
and bylaws that apply to conflicts of interest for commissioners and
for members of the governing body of the independent organization and

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submit to the legislature a report on the effects the statutes,

rules, protocols, and bylaws have on the ability of the commission
and the independent organization to fulfill their duties.

Added by Acts 2023, 88th Leg., R.S., Ch. 410 (H.B. 1500), Sec. 24(b),
eff. September 1, 2023.

Sec. 39.168. RETAIL SALES REPORT. (a) Each retail electric

provider that offers electricity for sale shall report to the
commission:
(1) its annual retail sales in this state;
(2) the annual retail sales of its affiliates by number of
customers, kilowatts per hour sold, and revenue from kilowatts per
hour sold by customer class; and
(3) any other information the commission requires relating
to affiliations between retail electric providers.
(b) The commission by rule shall prescribe the nature and
detail of the reporting requirements. The commission may accept
information reported under other law to satisfy the requirements of
this section. Information reported under this section is
confidential and not subject to disclosure if the information is
competitively sensitive information. The commission shall administer
the reporting requirements in a manner that ensures the
confidentiality of competitively sensitive information.

Added by Acts 2023, 88th Leg., R.S., Ch. 410 (H.B. 1500), Sec. 24(b),
eff. September 1, 2023.

SUBCHAPTER E. PRICE REGULATION AFTER COMPETITION

Sec. 39.201. COST OF SERVICE TARIFFS AND CHARGES. (a) Each
electric utility shall, on or before April 1, 2000, file proposed
tariffs for its proposed transmission and distribution utility.
(b) The filing under this section shall include supporting cost
data for determination of nonbypassable delivery charges, which shall
be the sum of:
(1) transmission and distribution utility charges by
customer class based on a forecasted 2002 test year;
(2) a system benefit fund fee; and
(3) an expected competition transition charge, if any.

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(c) Each electric utility shall also identify the unbundled

generation and retail energy service costs by customer class.
(d) In accordance with a schedule and procedures it
establishes, the commission shall hold a hearing and approve or
modify and make effective as of January 1, 2002, the transmission and
distribution utility's proposed tariffs for transmission and
distribution services, the system benefit fund fee, and the expected
competition transition charge as determined under Subsections (g) and
(h) and as implemented under Subsections (i)-(l), if any.
(e) The system benefit fund fee shall be that established by
the commission under Section 39.903.
(f) The expected competition transition charge shall be that as
determined under Subsections (g) and (h) and as implemented under
Subsections (i)-(l).
(g) The expected competition transition charge approved by the
commission shall be calculated from the amount of stranded costs as
defined in Subchapter F that are reasonably projected to exist on the
last day of the freeze period modified to reflect any adjustments
determined appropriate by the commission under Section 39.261(c).
(h) The electric utility shall use the ECOM administrative
model referenced in Section 39.262 to determine estimated stranded
costs. The model must include updated company-specific inputs.
Natural gas prices used in the model must be market-based natural gas
forward prices, where available. Growth rates in generating plant
operations and maintenance costs and allocated administrative and
general costs shall be benchmarked by comparing those costs to the
best available information on cost trends for comparable generating
plants. Capital additions shall be benchmarked using the limitation
in Section 39.259(b).
(i) An electric utility may:
(1) at any time after the start of the freeze period,
securitize 100 percent of its regulatory assets as defined by Section
39.302 and up to 75 percent of its estimated stranded costs as
defined by this section and recover those charges through a
transition charge, in accordance with a financing order issued by the
commission under Section 39.303;
(2) implement, under bond, a nonbypassable charge of up to
100 percent of its estimated stranded costs; or
(3) use a combination of the two methods under Subdivisions
(1) and (2).

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(j) Any competition transition charge shall be allocated among

retail customer classes according to Section 39.253.
(k) In determining the length of time over which stranded costs
under Subsection (h) may be recovered, the commission shall consider:
(1) the electric utility's rates as of the end of the
freeze period;
(2) the sum of the transmission and distribution charges
and the system benefit fund fees;
(3) the proportion of estimated stranded costs to the
invested capital of the electric utility; and
(4) any other factor consistent with the public interest as
expressed in this chapter.
(l) Two years after customer choice is introduced, the stranded
cost estimate under this section shall be reviewed and, if necessary,
adjusted to reflect a final, actual valuation in the true-up
proceeding under Section 39.262. If, based on that proceeding, the
competition transition charge is not sufficient, the commission may
extend the collection period for the charge or, if necessary,
increase the charge. Alternatively, if it is found in the true-up
proceeding that the competition transition charge is larger than is
needed to recover any remaining stranded costs, the commission may:
(1) reduce the competition transition charge, to the extent
it has not been securitized;
(2) reverse, in whole or in part, the depreciation expense
that has been redirected under Section 39.256;
(3) reduce the transmission and distribution utility's
rates; or
(4) implement a combination of the elements in Subdivisions
(1)-(3).

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 39.202. PRICE TO BEAT. (a) From January 1, 2002, until

January 1, 2007, an affiliated retail electric provider shall make
available to residential and small commercial customers of its
affiliated transmission and distribution utility rates that, on a
bundled basis, are six percent less than the affiliated electric
utility's corresponding average residential and small commercial
rates, on a bundled basis, that were in effect on January 1, 1999,

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adjusted to reflect the fuel factor determined as provided by

Subsection (b) and adjusted for any base rate reduction as stipulated
to by an electric utility in a proceeding for which a final order had
not been issued by January 1, 1999. These rates on a bundled basis
shall be known as the "price to beat" for residential and small
commercial customers, except that the "price to beat" for a utility
is the rate in effect as a result of a settlement approved by the
commission after January 1, 1999, if the commission determines that
base rates for that utility have been reduced by more than 12 percent
as a result of a final order issued by the commission after October
1, 1998.
(b) The commission shall determine the fuel factor for each
electric utility as of December 31, 2001.
(c) After the date of customer choice, each affiliated power
generation company shall file a final fuel reconciliation for the
period ending the day before the date customer choice is introduced.
The final fuel balance from that reconciliation shall be included in
the true-up proceeding under Section 39.262.
(d) An affiliated retail electric provider shall make public
its price to beat in a manner that provides adequate disclosure as
determined by the commission.
(e) The affiliated retail electric provider may not charge
rates for residential or small commercial customers that are
different from the price to beat until the earlier of 36 months after
the date customer choice is introduced or:
(1) for service to residential customers, the date the
commission determines that 40 percent or more of the electric power
consumed by residential customers within the affiliated transmission
and distribution utility's certificated service area before the onset
of customer choice is committed to be served by nonaffiliated retail
electric providers; or
(2) for service to small commercial customers, the date the
commission determines that 40 percent or more of the electric power
consumed by small commercial customers within the affiliated
transmission and distribution utility's certificated service area
before the onset of customer choice is committed to be served by
nonaffiliated retail electric providers.
(f) Notwithstanding Subsection (e), the affiliated retail
electric provider may charge rates that are different from the price
to beat for service to aggregated loads of nonresidential customers

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having an aggregated peak demand greater than 1,000 kilowatts,

provided that all affected customers are:
(1) commonly owned; or
(2) franchisees of the same franchisor.
(g) The affiliated retail electric provider may not encourage
or provide an incentive to a customer to switch to a nonaffiliated
retail electric provider, promote any nonaffiliated retail electric
provider, or exchange customers with any nonaffiliated retail
electric provider to comply with the requirements of Subsection
(e)(1) or (2).
(h) The following standards shall be used for measuring
electric power consumption during the period before the onset of
customer choice:
(1) the consumption of residential and small commercial
customers with an annual peak demand less than or equal to 20
kilowatts shall be based on the average annual consumption of those
respective groups during the year 2000;
(2) consumption for all small commercial customers with an
annual peak demand larger than 20 kilowatts shall be based on each
customer's usage during the year 2000; and
(3) for purposes of determining whether an affiliated
retail electric provider has met the requirements of Subsection
(e)(2), the aggregated loads of nonresidential customers having a
peak demand greater than 1,000 kilowatts that are served by the
affiliated retail electric provider at a rate different from the
price to beat under Subsection (f) shall be deducted from the
electric power consumption of small commercial customers during the
period before the onset of customer choice.
(i) For purposes of Subsection (h)(2), if less than 12 months
of consumption history exists for any such customer, the usage
history shall be supplemented with the prior history of that
customer's location. For service to a new location, the annual
consumption shall be determined as the transmission and distribution
utility's estimate of the maximum annual kilowatt demand used in
sizing the electric service to that customer multiplied by 8,760
hours, and that product multiplied by the average annual customer
load factor for small commercial customers with loads greater than 20
kilowatts for the year 2000.
(j) On determining that its affiliated retail electric provider
has met the requirements of Subsection (e)(1) or (2), an electric

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utility or a transmission and distribution utility shall make a

filing with the commission attesting to the fact that those
requirements have been met and that the restrictions of Subsection
(e)(1) or (2) and the true-up in Section 39.262(e) are no longer
applicable. The commission shall adopt appropriate procedures to
enable it to accept or reject the filing within 30 days.
(k) Following the true-up proceedings conducted under Section
39.262, the commission may adjust the price to beat.
(l) An affiliated retail electric provider may request that the
commission adjust the fuel factor established under Subsection (b)
not more than twice a year if the affiliated retail electric provider
demonstrates that the existing fuel factor does not adequately
reflect significant changes in the market price of natural gas and
purchased energy used to serve retail customers.
(m) In a power region outside of ERCOT, if customer choice is
introduced before the requirements of Section 39.152(a) are met, an
affiliated retail electric provider shall charge rates to customers
other than residential and small commercial customers that are no
higher than the rates that, on a bundled basis, were in effect on
January 1, 1999, adjusted to reflect the fuel factor as provided by
Subsection (b) and adjusted for any base rate reduction as stipulated
to by an electric utility in a proceeding for which a final order had
not been issued by January 1, 1999.
(n) Notwithstanding Subsection (a), in a power region outside
of ERCOT, if customer choice is introduced before the requirements of
Section 39.152(a) are met, an affiliated retail electric provider
shall continue to offer the price to beat to residential and small
commercial customers, unless the price is changed by the commission
in accordance with this chapter, until the later of 60 months after
the date customer choice is introduced or the requirements of Section
39.152(a) are met.
(o) In this section, "small commercial customer" means a
commercial customer having a peak demand of 1,000 kilowatts or less.
(p) On finding that a retail electric provider will be unable
to maintain its financial integrity if it complies with Subsection
(a), the commission shall set the retail electric provider's price to
beat at the minimum level that will allow the retail electric
provider to maintain its financial integrity. However, in no event
shall the price to beat exceed the level of rates, on a bundled
basis, charged by the affiliated electric utility on September 1,

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1999, adjusted for fuel as provided by Subsection (b).

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 39.203. TRANSMISSION AND DISTRIBUTION SERVICE. (a) All

transmission and distribution utilities shall provide transmission
service at wholesale under Subchapter A, Chapter 35. In addition, on
and after January 1, 2002, a transmission and distribution utility
shall provide transmission or distribution service, or both, at
retail to an electric utility, a retail electric provider, a
municipally owned utility, an electric cooperative, or an end-use
customer at rates, terms of access, and conditions that are
comparable to those that apply to the transmission and distribution
utility and its affiliates. A municipally owned utility offering
customer choice or an electric cooperative offering customer choice
shall likewise provide transmission or distribution service, or both,
at retail to all such entities in accordance with the commission's
rules applicable to terms and conditions of access and at rates
adopted in accordance with Sections 40.055(a)(1) and 41.055(1),
respectively.
(b) When necessary to serve a wholesale customer an electric
utility, an electric cooperative that has not opted for customer
choice, or a municipally owned utility that has not opted for
customer choice shall provide wholesale transmission service at
distribution voltage. A customer of a municipally owned utility that
has not opted for customer choice or of an electric cooperative that
has not opted for customer choice may not claim the status of a
wholesale customer or be designated as a wholesale customer if the
customer is being or has been served under a retail rate schedule of
the municipally owned utility or electric cooperative.
(c) On or before January 1, 2002, the commission shall
establish for all retail electric utilities offering customer choice
reasonable and comparable terms and conditions, in accordance with
Section 39.201, that comply with Subsection (a) for open access on
distribution facilities and shall establish, for all retail electric
utilities offering customer choice other than municipally owned
utilities and electric cooperatives, reasonable and comparable rates
for open access on distribution facilities.
(d) The terms of access, conditions, and rates established

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under Subsection (c) shall be comparable to the terms of access,

conditions, and rates that the electric utility applies to itself or
its affiliates. The rules shall also provide that all ancillary
services provided by the utility to itself or its affiliates are also
available to third parties on request on a nondiscriminatory basis.
(e) The commission may require an electric utility or a
transmission and distribution utility to construct or enlarge
facilities to ensure safe and reliable service for the state's
electric markets and to reduce transmission constraints within ERCOT
in a cost-effective manner where the constraints are such that they
are not being resolved through Chapter 37 or the ERCOT transmission
planning process. In any proceeding brought under Chapter 37, an
electric utility or transmission and distribution utility ordered to
construct or enlarge facilities under this subchapter need not prove
that the construction ordered is necessary for the service,
accommodation, convenience, or safety of the public and need not
address the factors listed in Sections 37.056(c)(1)-(3) and (4)(E).
Notwithstanding any other law, including Section 37.057, in any
proceeding brought under Chapter 37 by an electric utility or a
transmission and distribution utility related to an application for a
certificate of public convenience and necessity to construct or
enlarge transmission or transmission-related facilities under this
subsection, the commission shall issue a final order before the 181st
day after the date the application is filed with the commission. If
the commission does not issue a final order before that date, the
application is approved.
(f) The commission's rules must be consistent with the
standards of this title and may not be contrary to an applicable
decision, rule, or policy statement of a federal regulatory agency
having jurisdiction.
(g) Each power region shall have generally applicable tariffs
approved by the commission or a federal regulatory agency having
jurisdiction that guarantees open and nondiscriminatory access as
required by Section 39.152. This subsection may not be deemed to
vest in the commission power to set or approve distribution access
rates of a municipally owned utility or an electric cooperative that
has adopted customer choice.
(h) A customer in a multiply certificated service area may
switch its retail distribution service provider among certificated
retail electric utilities only by disconnecting from the facilities

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of one retail electric utility and connecting to the facilities of

another retail electric utility.
(i) The commission, in cooperation with transmission and
distribution utilities and the ERCOT independent system operator,
shall study whether existing transmission and distribution planning
processes are sufficient to provide adequate infrastructure for
seawater desalination projects. If the commission determines that
statutory changes are needed to ensure that adequate infrastructure
is developed for projects of that kind, the commission shall include
recommendations in the report required by Section 12.203.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.
Amended by Acts 2003, 78th Leg., ch. 295, Sec. 3, eff. June 18, 2003.
Amended by:
Acts 2005, 79th Leg., 1st C.S., Ch. 1 (S.B. 20), Sec. 2, eff.
September 1, 2005.
Acts 2015, 84th Leg., R.S., Ch. 829 (H.B. 4097), Sec. 1, eff.
June 17, 2015.
Acts 2023, 88th Leg., R.S., Ch. 410 (H.B. 1500), Sec. 26, eff.
September 1, 2023.

Sec. 39.204. TARIFFS FOR OPEN ACCESS. Each transmission and

distribution utility shall file a tariff implementing the open access
rules with the commission or the federal regulatory authority having
jurisdiction over the transmission and distribution service of the
utility not later than the 90th day before the date customer choice
is offered by that utility.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 39.205. REGULATION OF COSTS FOLLOWING FREEZE PERIOD. At

the conclusion of the freeze period, any remaining costs associated
with nuclear decommissioning obligations continue to be subject to
cost of service rate regulation and shall be included as a
nonbypassable charge to retail customers. The commission may adopt
rules necessary to ensure that money for decommissioning is prudently
collected, managed, and spent for its intended purpose and that money
that remains unspent after decommissioning is completed is returned
to retail customers.

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Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.
Amended by:
Acts 2005, 79th Leg., Ch. 121 (S.B. 1464), Sec. 2, eff. September
1, 2005.

Sec. 39.206. NUCLEAR GENERATING UNIT DECOMMISSIONING COST PLAN.

(a) For purposes of this section:
(1) "Decommissioning" includes decommissioning and
decontamination of a nuclear generating unit consistent with federal
Nuclear Regulatory Commission requirements.
(2) "Nuclear decommissioning trust" means an external and
irrevocable trust created for the purpose of funding decommissioning
obligations for a nuclear generating unit, consistent with federal
Nuclear Regulatory Commission requirements.
(3) "Nuclear generating unit" means an electric generating
facility that uses nuclear energy to generate electricity for sale
and is licensed by the Nuclear Regulatory Commission.
(4) "Power generation company" has the meaning assigned by
Section 31.002.
(5) "Retail electric customer" means a retail electric
customer:
(A) in a geographic area of this state in which retail
customer choice has been implemented; or
(B) of a municipally owned utility or electric
cooperative that has an agreement to purchase power from a nuclear
generating unit.
(b) This section applies only to the first six nuclear
generating units the construction of which begins on or after January
1, 2013, and before January 1, 2033, and which are owned in whole or
in part by a power generation company that elects to utilize the
decommissioning mechanism set forth in this section.
(c) Nothing in this section shall be construed to require a
power generation company to use a commission approved method to
provide funds for decommissioning, if the power generation company
can otherwise satisfy the decommissioning financial assurance
requirements of the federal Nuclear Regulatory Commission.
(d) A power generation company that owns a nuclear generating
unit shall fund out of operating revenues on an annual basis:
(1) the costs associated with funding the decommissioning

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obligations for the nuclear generating unit; or

(2) the power generation company's portion of the
decommissioning costs for the nuclear generating unit in proportion
to the company's ownership interest in the nuclear generating unit if
the unit is owned by more than one person.
(e) The obligation to fund a nuclear decommissioning trust fund
is not dischargeable in bankruptcy.
(f) A power generation company shall establish a nuclear
decommissioning trust for a nuclear generating unit it owns or for
the proportionate share of a nuclear generating unit of which it owns
a part. The funding obligations for the trust must begin before the
nuclear generating unit commences its initial fuel load and begins
commercial operation to generate power for sale. The terms of the
trust must be consistent with trust terms and conditions the federal
Nuclear Regulatory Commission requires for providing financial
assurance for decommissioning.
(g) The commission by order shall establish for a nuclear
generating unit the amount of annual decommissioning funding
necessary to meet the decommissioning obligations for the nuclear
generating unit over the unit's operating license period as
established by the federal Nuclear Regulatory Commission or over a
shorter period of time at the election of the power generation
company. The power generation company shall perform a study on the
cost of decommissioning to establish the decommissioning obligations
before the nuclear generating unit begins commercial operation to
generate power for sale. The study shall be performed by the power
generation company at least once in each three-year period during the
unit's operating license period using the most current reasonably
available information on the cost of decommissioning. The commission
shall conduct a proceeding at least once in each three-year period to
review the study and other current reasonably available information
on the cost of decommissioning and determine the reasonableness of
the study.
(h) A power generation company shall file an annual report to
provide the status of the decommissioning trust fund and to update
the commission as to its ability to fund the decommissioning trust
fund. In determining the amount of the annual decommissioning
funding under this subsection, at least once in each three-year
period, the commission shall conduct a proceeding to review the
balance of each nuclear decommissioning trust and the projected

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amount of annual decommissioning funding for the associated nuclear

generating unit. On the conclusion of the review proceeding, the
commission by order shall revise the amount of annual funding for the
nuclear generating unit in order to ensure that the nuclear
decommissioning trust fund is adequately funded.
(i) A power generation company shall remit the appropriate
amount of annual decommissioning funding to the nuclear
decommissioning trust created for its proportionate ownership
position in a nuclear generating unit in accordance with the
commission's funding order issued under Subsection (g) or (h). The
commission shall take appropriate actions to ensure proper funding of
the nuclear decommissioning trust, including possibly terminating the
power generation company's registration to operate, if the company
violates this subsection.
(j) A power generation company that owns a nuclear generating
unit is the funds administrator of the nuclear decommissioning trust
for the associated nuclear generating unit. The company, as funds
administrator, shall invest the trust funds in accordance with
guidelines established by commission rule and consistent with the
federal Nuclear Regulatory Commission guidelines so that the
decommissioning funds, plus the amounts earned from investment of the
funds, will be available at the time of decommissioning. The
commission shall adopt rules to define the company's specific duties
as funds administrator and requirements regarding prudent management
and investment of nuclear decommissioning trust funds.
(k) The commission shall adopt rules necessary to ensure that:
(1) a power generation company remits sufficient funds to a
nuclear decommissioning trust on an annual basis, including projected
earnings to approximate the amount remaining to be accumulated to
cover the cost of decommissioning a nuclear generating unit at the
end of its operating license period divided by the remaining years
of the license and in accordance with applicable state and federal
laws and regulations or over a shorter period of time at the election
of the power generation company;
(2) the periodic cost studies and reviews described in
Subsections (g) and (h) include all current reasonably available
information as determined necessary and appropriate by the
commission;
(3) all funds remitted to a nuclear decommissioning trust
are prudently managed and spent for their intended purpose;

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(4) the funds remitted to a nuclear decommissioning trust

and the amounts earned from investing the funds, will be available
for, and restricted to the purpose of decommissioning of the
associated nuclear generating unit, including if the trust or nuclear
generating unit is transferred to another person; and
(5) before a power generation company is allowed to take
advantage of the mechanisms in this section, the company meets
creditworthiness standards established by the commission to minimize
the risk that retail electric customers will be responsible for
funding any shortfall in the cost of decommissioning a nuclear
generating unit.
(l) In addition to the nuclear decommissioning trust required
by Subsection (f), for purposes of Subsection (k), the power
generation company and its parent and affiliates shall provide
financial assurances that funds will be available to satisfy up to 16
years of annual decommissioning funding in the event the power
generation company defaults on its obligation to make annual funding
to the decommissioning trust. Within 180 days after the effective
date of this section, the commission by rule shall establish the
acceptable forms of financial assurance, which shall include, but not
be limited to, parent guarantees and support agreements, letters of
credit, surety or insurance, and such other requirements necessary to
ensure compliance with this section. In establishing the acceptable
forms of assurance, and the eligibility requirements for each form of
assurance, the commission shall consider the relative risk factors
and creditworthiness attributes of potential applicant financial
characteristics in order to minimize exposure of retail electric
customers to default by power generation companies under this
section. The power generation company may choose the manner of
financial assurance for which it is eligible under the commission's
rules.
(m) In the event the financial assurances provided by
Subsection (k) are insufficient to meet the annual funding
requirements of the decommissioning trust, the retail electric
customers shall be responsible for funding any shortfall in the cost
of decommissioning the nuclear generating unit.
(n) The commission shall determine the manner in which any
shortfall in the cost of decommissioning a nuclear generating unit
shall be recovered from retail electric customers in the state,
consistent with law.

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(o) For retail electric customers of a municipally owned

utility or an electric cooperative that has an agreement to purchase
power from a nuclear generating unit, the amount of the shortfall in
the cost of decommissioning the nuclear generating unit that the
customers are responsible for is limited to a portion of that
shortfall that bears the same proportion to the total shortfall as
the amount of electric power generated by the nuclear generating unit
and purchased by the municipally owned utility or electric
cooperative bears to the total amount of power the nuclear generating
unit generated.
(p) If retail electric customers in this state become
responsible for the costs of decommissioning a nuclear generating
unit and incur costs under this section and the nuclear generating
unit is operational, as a condition of operating the generating unit,
the power generation company or any new owner shall repay the costs
the electric customers incurred in the manner determined by the
commission. The commission may authorize the repayment to occur over
a period established by the commission.
(q) The commission shall, in conjunction with the Nuclear
Regulatory Commission, investigate the development of a mechanism
whereby the State of Texas could ensure that funds for
decommissioning will be obtained when necessary in the same manner as
if the State of Texas were the licensee under federal law.
(r) The commission by rule shall ensure that:
(1) money for decommissioning a nuclear generating unit is
prudently collected, managed, and spent for its intended purposes;
and
(2) decommissioning money that remains unspent after
decommissioning of the nuclear generating unit is complete is
returned to the power generation company and the retail electric
customers based on the proportionate amount of money the power
generation company and retail electric customers paid into the fund.

Added by Acts 2007, 80th Leg., R.S., Ch. 1019 (H.B. 1386), Sec. 1,
eff. September 1, 2007.
Amended by:
Acts 2013, 83rd Leg., R.S., Ch. 55 (H.B. 994), Sec. 1, eff. May
18, 2013.
Acts 2013, 83rd Leg., R.S., Ch. 55 (H.B. 994), Sec. 2, eff. May
18, 2013.

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Acts 2023, 88th Leg., R.S., Ch. 410 (H.B. 1500), Sec. 27, eff.
September 1, 2023.

SUBCHAPTER F. RECOVERY OF STRANDED COSTS THROUGH COMPETITION

TRANSITION CHARGE
Sec. 39.251. DEFINITIONS. In this subchapter:
(1) "Above market purchased power costs" means wholesale
demand and energy costs that a utility is obligated to pay under an
existing purchased power contract to the extent the costs are greater
than the purchased power market value.
(2) "Existing purchased power contract" means a purchased
power contract in effect on January 1, 1999, including any amendments
and revisions to that contract resulting from litigation initiated
before January 1, 1999.
(3) "Generation assets" means all assets associated with
the production of electricity, including generation plants,
electrical interconnections of the generation plant to the
transmission system, fuel contracts, fuel transportation contracts,
water contracts, lands, surface or subsurface water rights,
emissions-related allowances, and gas pipeline interconnections.
(4) "Market value" means, for nonnuclear assets and certain
nuclear assets, the value the assets would have if bought and sold in
a bona fide third-party transaction or transactions on the open
market under Section 39.262(h) or, for certain nuclear assets, as
described by Section 39.262(i), the value determined under the method
provided by that subsection.
(5) "Purchased power market value" means the value of
demand and energy bought and sold in a bona fide third-party
transaction or transactions on the open market and determined by
using the weighted average costs of the highest three offers from the
market for purchase of the demand and energy available under the
existing purchased power contracts.
(6) "Retail stranded costs" means that part of net stranded
cost associated with the provision of retail service.
(7) "Stranded cost" means the positive excess of the net
book value of generation assets over the market value of the assets,
taking into account all of the electric utility's generation assets,
any above market purchased power costs, and any deferred debit
related to a utility's discontinuance of the application of Statement

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of Financial Accounting Standards No. 71 ("Accounting for the Effects

of Certain Types of Regulation") for generation-related assets if
required by the provisions of this chapter. For purposes of Section
39.262, book value shall be established as of December 31, 2001, or
the date a market value is established through a market valuation
method under Section 39.262(h), whichever is earlier, and shall
include stranded costs incurred under Section 39.263.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 39.252. RIGHT TO RECOVER STRANDED COSTS. (a) An electric

utility is allowed to recover all of its net, verifiable,
nonmitigable stranded costs incurred in purchasing power and
providing electric generation service.
(b)(1) Recovery of retail stranded costs by an electric utility
shall be from all existing or future retail customers, including the
facilities, premises, and loads of those retail customers, within the
utility's geographical certificated service area as it existed on May
1, 1999. A retail customer may not avoid stranded cost recovery
charges by switching to new on-site generation except as provided by
Section 39.262(k). For purposes of this subchapter, "new on-site
generation" means electric generation capacity greater than 10
megawatts capable of being lawfully delivered to the site without use
of utility distribution or transmission facilities and which was not,
on or before December 31, 1999, either:
(A) a fully operational facility; or
(B) a project supported by substantially complete
filings for all necessary site-specific environmental permits under
the rules of the Texas Natural Resource Conservation Commission in
effect at the time of filing.
(2) If a customer commences taking energy from new on-site
generation which materially reduces the customer's use of energy
delivered through the utility's facilities, the customer shall pay an
amount each month computed by multiplying the output of the on-site
generation by the new sum of competition transition charges under
Section 39.201 and transition charges under Subchapter G which are in
effect during that month. Payment shall be made to the utility, its
successors, an assignee, or other collection agent responsible for
collecting the competition transition charges and transition charges

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and shall be collected in addition to the competition transition

charges and transition charges applicable to energy actually
delivered to the customer through the utility's facilities.
(c) In multiply certificated areas, a retail customer may not
avoid stranded cost recovery charges by switching to another electric
utility, electric cooperative, or municipally owned utility after May
1, 1999. A customer in a multiply certificated service area that
requested to switch providers on or before May 1, 1999, or was not
taking service from an electric utility on May 1, 1999, and does not
do so after that date is not responsible for paying retail stranded
costs of that utility.
(d) An electric utility shall pursue commercially reasonable
means to reduce its potential stranded costs, including good faith
attempts to renegotiate above-cost fuel and purchased power contracts
or the exercise of normal business practices to protect the value of
its assets. The commission shall consider the utility's efforts
under this subsection when determining the amount of the utility's
stranded costs; provided, however, that nothing in this section
authorizes the commission to substitute its judgment for a market
valuation of generation assets determined under Sections 39.262(h)
and (i).

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 39.253. ALLOCATION OF STRANDED COSTS. (a) Any capital

costs incurred by an electric utility to improve air quality under
Section 39.263 or 39.264 that are included in a utility's invested
capital in accordance with those sections shall be allocated among
customer classes as follows:
(1) 50 percent of those costs shall be allocated in
accordance with the methodology used to allocate the costs of the
underlying assets in the electric utility's most recent commission
order addressing rate design; and
(2) the remainder shall be allocated on the basis of the
energy consumption of the customer classes.
(b) All other retail stranded costs shall be allocated among
retail customer classes in accordance with Subsections (c)-(i).
(c) The allocation to the residential class shall be determined
by allocating to all customer classes 50 percent of the stranded

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costs in accordance with the methodology used to allocate the costs

of the underlying assets in the electric utility's most recent
commission order addressing rate design and allocating the remainder
of the stranded costs on the basis of the energy consumption of the
classes.
(d) After the allocation to the residential class required by
Subsection (c) has been calculated, the remaining stranded costs
shall be allocated to the remaining customer classes in accordance
with the methodology used to allocate the costs of the underlying
assets in the electric utility's most recent commission order
addressing rate design. Non-firm industrial customers shall be
allocated stranded costs equal to 150 percent of the amount allocated
to that class.
(e) After the allocation to the residential class required by
Subsection (c) and the allocation to the nonfirm industrial class
required by Subsection (d) have been calculated, the remaining
stranded costs shall be allocated to the remaining customer classes
in accordance with the methodology used to allocate the costs of the
underlying assets in the electric utility's most recent commission
order addressing rate design.
(f) Notwithstanding any other provision of this section, to the
extent that the total retail stranded costs, including regulatory
assets, of investor-owned utilities exceed $5 billion on a statewide
basis, any stranded costs in excess of $5 billion shall be allocated
among retail customer classes in accordance with the methodology used
to allocate the costs of the underlying assets in the electric
utility's most recent commission order addressing rate design.
(g) The energy consumption of the customer classes used in
Subsections (a)(2) and (c) shall be based on the relevant class
characteristics as of May 1, 1999, adjusted for normal weather
conditions.
(h) For purposes of this section, "stranded costs" includes
regulatory assets.
(i) Except as provided by Section 39.262(k), no customer or
customer class may avoid the obligation to pay the amount of stranded
costs allocated to that customer class.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

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Sec. 39.254. USE OF REVENUES FOR UTILITIES WITH STRANDED COSTS.

This subchapter provides a number of tools to an electric utility to
mitigate stranded costs. Each electric utility that was reported by
the commission to have positive "excess costs over market" (ECOM),
denoted as the "base case" for the amount of stranded costs before
full retail competition in 2002 with respect to its Texas
jurisdiction, in the April 1998 Report to the Texas Senate Interim
Committee on Electric Utility Restructuring entitled "Potentially
Strandable Investment (ECOM) Report: 1998 Update," must use these
tools to reduce the net book value of, otherwise referred to as
"accelerate" the cost recovery of, its stranded costs each year. Any
positive difference under the report required by Section 39.257(b)
shall be applied to the net book value of generation assets.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 39.255. USE OF REVENUES FOR UTILITIES WITH NO STRANDED

COSTS. (a) An electric utility that does not have stranded costs
described by Section 39.254 shall be permitted to use any positive
difference under the report required by Section 39.257(b) on capital
expenditures to improve or expand transmission or distribution
facilities, or on capital expenditures to improve air quality, as
approved by the commission. Any such capital expenditures shall be
made in the calendar year immediately following the year for which
the report required by Section 39.257 is calculated. The capital
expenditures shall be reflected in any future proceeding under this
chapter to set transmission or distribution rates as a reduction to
the utility's transmission and distribution invested capital, as
approved by the commission.
(b) To the extent that positive differences under the report
required by Section 39.257(b) are not used for capital expenditures,
the amounts shall be flowed back to the electric utility's Texas
jurisdictional customers through the power cost recovery factor.
(c) This section applies only to the use of positive
differences under the report required by Section 39.257(b) for each
year during the freeze period.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

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Sec. 39.256. OPTION TO REDIRECT DEPRECIATION. (a) For the

calendar years of 1998, 1999, 2000, and 2001, an electric utility
described by Section 39.254 may redirect all or a part of the
depreciation expense relating to transmission and distribution assets
to its net generation plant assets.
(b) The electric utility shall report a decision under
Subsection (a) to the commission and any other applicable regulatory
authority.
(c) Any adjustments made to the book value of transmission and
distribution assets or the creation of any related regulatory assets
resulting from the redirection under this section shall be accepted
and applied by the commission for establishing net invested capital
and transmission and distribution rates for retail customers in all
future proceedings.
(d) Notwithstanding Subsection (c), the design of post-freeze-
period retail rates may not:
(1) shift the allocation of responsibility for stranded
costs;
(2) include the adjusted costs in wholesale transmission
and distribution rates; or
(3) apply the adjustments for the purpose of establishing
net invested capital and transmission and distribution rates for
wholesale customers.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 39.257. ANNUAL REPORT. (a) Beginning with the 1999

calendar year, each electric utility shall file a report with the
commission not later than 90 days after the end of each year during
the freeze period under a schedule and a format determined by the
commission.
(b) The report shall identify any positive difference between
annual revenues, reduced by the amount of annual revenues under
Sections 36.203 and 36.205, the revenues received under the
interutility billing process as adopted by the commission to
implement Sections 35.004, 35.006, and 35.007, revenues associated
with transition charges as defined by Section 39.302, and annual
costs.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

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Sec. 39.258. ANNUAL REPORT: DETERMINATION OF ANNUAL COSTS.

For the purposes of determining the annual costs in each annual
report, the following amounts shall be used:
(1) the lesser of:
(A) the utility's Texas jurisdictional operation and
maintenance expense reflected in each utility's Federal Energy
Regulatory Commission Form 1 of the report year, plus factoring
expenses not included in operation and maintenance, adjusted for:
(i) costs under Sections 36.062, 36.203, and
36.205; and
(ii) revenues recorded under the interutility
billing process adopted by the commission to implement Sections
35.004, 35.006, and 35.007; or
(B) the Texas jurisdictional operation and maintenance
expense reflected in each utility's 1996 Federal Energy Regulatory
Commission Form 1, plus factoring expenses not included in operation
and maintenance, adjusted for:
(i) costs under Sections 36.062, 36.203, and
36.205, and not indexed for inflation;
(ii) any difference between the annual revenues and
the expenses recorded under the interutility billing process adopted
by the commission to implement Sections 35.004, 35.006, and 35.007;
and
(iii) the annual percentage change in the average
number of utility customers;
(2) the amount of nuclear decommissioning expense approved
in the electric utility's last rate proceeding before the commission,
as may be required to be adjusted to comply with applicable federal
regulatory requirements;
(3) the depreciation rates approved in the electric
utility's last rate proceeding before the commission;
(4) the amortization expense approved in the electric
utility's last rate proceeding before the commission or in any other
proceeding in which deferred costs and the amortization of those
costs are established, except that if the items are fully amortized
during the freeze period, the expense shall be adjusted accordingly;
(5) taxes and fees, including municipal franchise fees to
the extent not included in Subdivision (1), other than federal income

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taxes, and assessments incurred that year;

(6) federal income tax expense, computed according to the
stand-alone methodology and using the actual capital structure and
actual cost of debt as of December 31 of the report year;
(7) return on invested capital, computed by multiplying
invested capital as of December 31 of the report year, determined as
provided by Section 39.259, by the cost of capital approved in the
electric utility's most recent rate proceeding before the commission
in which the cost of capital was specifically adopted, or, in the
case of a range, the midpoint of the range, if the final rate order
for the proceeding was issued on or after January 1, 1992, or if such
an order does not exist, a cost of capital of 9.6 percent shall be
used; and
(8) the amount resulting from any operation and maintenance
expense savings tracker from a merger of two utilities and contained
in a settlement agreement approved by the commission before January
1, 1999.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 39.259. ANNUAL REPORT: DETERMINATION OF INVESTED CAPITAL.

(a) For the purposes of determining invested capital in each annual
report, the net plant in service, regulatory assets, and deferred
federal income taxes shall be updated each year, and generation-
related invested capital shall be reduced by the amount of
securitization under Sections 39.201(i) and 39.262(c) to the extent
otherwise included in invested capital.
(b) Capital additions to a plant in an amount less than 1-1/2
percent of the electric utility's net plant in service on December
31, 1998, less plant items previously excluded by the commission, for
each of the years 1999 through 2001 are presumed prudent.
(c) All other items in invested capital shall be as approved in
the electric utility's last rate proceeding before the commission.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 39.260. USE OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES.

(a) The definition and identification of invested capital and other
terms used in this subchapter and Subchapter G that affect the net

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book value of generation assets and the treatment of transactions

performed under Section 35.035 and other transactions authorized by
this title or approved by the regulatory authority that affect the
net book value of generation assets during the freeze period shall be
treated in accordance with generally accepted accounting principles
as modified by regulatory accounting rules generally applicable to
utilities.
(b) The principles and criteria described by Subsection (a),
including the criteria for applicability of Statement of Financial
Accounting Standards No. 71 ("Accounting for the Effects of Certain
Types of Regulation"), shall be applied for purposes of this
subchapter as they existed on January 1, 1999.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 39.261. REVIEW OF ANNUAL REPORT. (a) The annual report

filed under this subchapter is a public document and shall be
reviewed by the staff of the commission and the office. Both staffs
may review work papers and supporting documents and engage in
discussions with the utility about the data underlying the reports.
(b) The staff of the commission and the office shall
communicate in writing to an electric utility not later than the
180th day after the date the report is filed if they have any
disagreements with the data or computations.
(c) The commission shall finalize and resolve any disagreements
related to the annual report, consistent with the requirements of
Section 39.258, as follows:
(1) for each calendar year, the commission shall finalize
the annual report before establishing the competition transition
charge under Section 39.201; and
(2) for each calendar year, the commission shall finalize
the annual report and reflect the result as part of the true-up
proceeding under Section 39.262.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 39.262. TRUE-UP PROCEEDING. (a) An electric utility,

together with its affiliated retail electric provider and its
affiliated transmission and distribution utility, may not be

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permitted to overrecover stranded costs through the procedures

established by this section or through the application of the
measures provided by the other sections of this chapter.
(b) After the freeze period, an electric utility located in a
power region that is not certified under Section 39.152 shall
continue to file annual reports under Sections 39.257, 39.258, and
39.259 as if the freeze period remained in effect, until the time the
power region qualifies as certified under Section 39.152. In
addition, the commission staff and the office shall continue to
review the annual reports as provided by Section 39.261.
(c) After January 10, 2004, at a schedule and under procedures
to be determined by the commission, each transmission and
distribution utility, its affiliated retail electric provider, and
its affiliated power generation company shall jointly file to
finalize stranded costs under Subsections (h) and (i) and reconcile
those costs with the estimated stranded costs used to develop the
competition transition charge in the proceeding held under Section
39.201. Any resulting difference shall be applied to the
nonbypassable delivery rates of the transmission and distribution
utility, except that at the utility's option, any or all of the
amounts recovered under this section may be securitized under
Subchapter G.
(d) The affiliated power generation company shall reconcile,
and either credit or bill to the transmission and distribution
utility, the net sum of:
(1) the former electric utility's final fuel balance
determined under Section 39.202(c); and
(2) any difference between the price of power obtained
through the capacity auctions under Sections 39.153 and 39.156 and
the power cost projections that were employed for the same time
period in the ECOM model to estimate stranded costs in the proceeding
under Section 39.201.
(e) To the extent that the price to beat exceeded the market
price of electricity, the affiliated retail electric provider shall
reconcile and credit to the affiliated transmission and distribution
utility any positive difference between the price to beat established
under Section 39.202, reduced by the nonbypassable delivery charge
established under Section 39.201, and the prevailing market price of
electricity during the same time period. A reconciliation for the
applicable customer class is not required under this subsection for

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an affiliated retail electric provider that satisfies the

requirements of Section 39.202(e)(1) or (2) before the expiration of
two years from the introduction of customer choice. If a
reconciliation is required, in no event shall the amount credited
exceed an amount equal to the number of residential or small
commercial customers served by the affiliated transmission and
distribution utility that are buying electricity from the affiliated
retail electric provider at the price to beat on the second
anniversary of the beginning of competition, minus the number of new
customers obtained outside the service area, multiplied by $150.
(f) To the extent that any amount of regulatory assets included
in a transition charge or competition transition charge exceeds the
amount of regulatory assets approved in a rate order which became
effective on or before September 1, 1999, the commission shall
conduct a review during the true-up proceeding to determine whether
such amounts were appropriately calculated and constituted reasonable
and necessary costs pursuant to Subchapter B, Chapter 36. If the
commission finds that the amount of regulatory assets specified in
Section 39.302(5) is subject to modification, a credit or other rate
adjustment shall be made to the transmission and distribution
utility's nonbypassable delivery rates; provided, however, that no
adjustment may be made to a transition charge established under
Subchapter G.
(g) Based on the credits or bills received from its affiliates
under Subsections (d), (e), and (f), the transmission and
distribution utility shall make necessary adjustments to the
nonbypassable delivery rates it charges to retail electric providers.
If the commission determines that the nonbypassable delivery rates
are not sufficient, the commission may extend the original collection
period for the charge or, if necessary, increase the charge.
Alternatively, if the commission determines that the nonbypassable
delivery rates are larger than are needed to recover the transmission
and distribution utility's costs, the commission shall
correspondingly reduce:
(1) the competition transition charge, to the extent it has
not been securitized;
(2) the depreciation expense that has been redirected under
Section 39.256;
(3) the transmission and distribution utility's rates; or
(4) a combination of the elements in Subdivisions (1)-(3).

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(h) Except as provided in Subsection (i), for the purpose of

finalizing the stranded cost estimate used to establish the
competition transition charge under Section 39.201, the affiliated
power generation company shall quantify its stranded costs using one
or more of the following methods:
(1) Sale of Assets. If, at any time after December 31,
1999, an electric utility or its affiliated power generation company
has sold some or all of its generation assets, which sale shall
include all generating assets associated with each generating plant
that is sold, in a bona fide third-party transaction under a
competitive offering, the total net value realized from the sale
establishes the market value of the generation assets sold. If not
all assets are sold, the market value of the remaining generation
assets shall be established by one or more of the other methods in
this section.
(2) Stock Valuation Method. If, at any time after December
31, 1999, an electric utility or its affiliated power generation
company has transferred some or all of its generation assets,
including, at the election of the electric utility or power
generation company, any fuel and fuel transportation contracts
related to those assets, to one or more separate affiliated or
nonaffiliated corporations, not less than 51 percent of the common
stock of each corporation is spun off and sold to public investors
through a national stock exchange, and the common stock has been
traded for not less than one year, the resulting average daily
closing price of the common stock over 30 consecutive trading days
chosen by the commission out of the last 120 consecutive trading days
before the filing required under Subsection (c) establishes the
market value of the common stock equity in each transferee
corporation. The book value of each transferee corporation's debt
and preferred stock securities shall be added to the market value of
its assets. The market value of each transferee corporation's assets
shall be reduced by the corresponding net book value of the assets
acquired by each transferee corporation from any entity other than
the affiliated electric utility or power generation company. The
resulting market value of the assets establishes the market value of
the generation assets transferred by the electric utility or power
generation company to each separate corporation. If not all assets
are disposed of in this manner, the market value of the remaining
assets shall be established by one or more of the other methods in

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this section.
(3) Partial Stock Valuation Method. If, at any time after
December 31, 1999, an electric utility or its affiliated power
generation company has transferred some or all of its generation
assets, including, at the election of the electric utility or power
generation company, any fuel and fuel transportation contracts
related to those assets, to one or more separate affiliated or
nonaffiliated corporations, at least 19 percent, but less than 51
percent, of the common stock of each corporation is spun off and sold
to public investors through a national stock exchange, and the common
stock has been traded for not less than one year, the resulting
average daily closing price of the common stock over 30 consecutive
trading days chosen by the commission out of the last 120 consecutive
trading days before the filing required under Subsection (c) shall be
presumed to establish the market value of the common stock equity in
each transferee corporation. The commission may accept the market
valuation to conclusively establish the value of the common stock
equity in each transferee corporation or convene a valuation panel of
three independent financial experts to determine whether the
percentage of common stock sold is fairly representative of the total
common stock equity or whether a control premium exists for the
retained interest. The valuation panel must consist of financial
experts, chosen from proposals submitted in response to commission
requests, from the top 10 nationally recognized investment banks with
demonstrated experience in the United States electric industry as
indicated by the dollar amount of public offerings of long-term debt
and equity of United States investor-owned electric companies over
the immediately preceding three years as ranked by the publications
"Securities Data" or "Institutional Investor." If the panel
determines that a control premium exists for the retained interest,
the panel shall determine the amount of the control premium, and the
commission shall adopt the determination but may not increase the
market value by a control premium greater than 10 percent. The costs
and expenses of the panel, as approved by the commission, shall be
paid by each transferee corporation. The determination of the
commission based on the finding of the panel conclusively establishes
the value of the common stock of each transferee corporation. The
book value of each transferee corporation's debt and preferred stock
securities shall be added to the market value of its assets. The
market value of each transferee corporation's assets shall be reduced

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by the corresponding net book value of the assets acquired by each

transferee corporation from any entity other than the affiliated
electric utility or power generation company. The resulting market
value of the assets establishes the market value of the generation
assets transferred by the electric utility or power generation
company to each separate corporation.
(4) Exchange of Assets. If, at any time after December 31,
1999, an electric utility or its affiliated power generation company
has transferred some or all of its generation assets, including any
fuel and fuel transportation contracts related to those assets, in a
bona fide third-party exchange transaction, the stranded costs
related to the transferred assets shall be the difference between the
book value and the market value of the transferred assets at the time
of the exchange, taking into account any other consideration received
or given. The market value of the transferred assets may be
determined through an appraisal by a nationally recognized
independent appraisal firm, if the market value is subject to a
market valuation by means of an offer of sale in accordance with this
subdivision. To obtain a market valuation by means of an offer of
sale, the owner of the asset shall offer it for sale to other parties
under procedures that provide broad public notice of the offer and a
reasonable opportunity for other parties to bid on the asset. The
owner of the asset may establish a reserve price for any offer based
on the sum of the appraised value of the asset and the tax impact of
selling the asset, as determined by the commission.
(i) Unless an electric utility or its affiliated power
generation company combines all of its remaining generation assets
into one or more transferee corporations as described in Subsections
(h)(2) and (3), the electric utility shall quantify its stranded
costs for nuclear assets using the ECOM method. The ECOM method is
the estimation model prepared for and described by the commission's
April 1998 Report to the Texas Senate Interim Committee on Electric
Restructuring entitled "Potentially Strandable Investment (ECOM)
Report: 1998 Update." The methodology used in the model must be the
same as that used in the 1998 report to determine the "base case."
At the time of the proceeding under this section, the ECOM model
shall be rerun using updated company-specific inputs required by the
model, updating the market price of electricity, and using updated
natural gas price forecasts and the capacity cost based on the long-
run marginal cost of the most economic new generation technology then

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available. Natural gas price projections used in the model must be

market-based natural gas forward prices, where available. Growth
rates in generating plant operations and maintenance costs and
allocated administrative and general costs shall be benchmarked by
comparing those costs to the best available information on cost
trends for comparable generating plants. Capital additions shall be
benchmarked using the limitation in Section 39.259(b).
(j) The commission shall issue a final order not later than the
150th day after the date of the filing under this section by the
transmission and distribution utility, its affiliated retail electric
provider, and its affiliated power generation company, and the
resulting order shall be subject to judicial review under Chapter
2001, Government Code.
(k) Notwithstanding Section 39.252, to the extent that a
customer's actual load has been lawfully served by a fully
operational qualifying facility before September 1, 2001, or by an
on-site power production facility with a rated capacity of 10
megawatts or less, any charge for recovery of stranded costs under
this section or Subchapter G assessed on that customer after the
facility becomes fully operational shall be included only in those
tariffs or charges associated with the services actually provided by
the transmission and distribution utility, if any, to the customer
after the facility became fully operational and may not include any
costs associated with the service provided to the customer by the
electric utility or its affiliated transmission and distribution
utility under their tariffs before the operation of that qualifying
facility. To qualify under this subsection, a qualifying facility
must have made substantially complete filings on or before December
31, 1999, for all necessary site-specific environmental permits under
the rules of the Texas Natural Resource Conservation Commission in
effect at the time of filing.
(l) To protect retail customers in this state, and ensure the
appropriateness of the nonbypassable rates of electric utilities and
transmission and distribution utilities, notwithstanding any other
provision of this title, an electric utility or transmission and
distribution utility must report to and obtain approval of the
commission before closing any transaction in which:
(1) the electric utility or transmission and distribution
utility will be merged or consolidated with another electric utility
or transmission and distribution utility;

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(2) at least 50 percent of the stock of the electric

utility or transmission and distribution utility will be transferred
or sold; or
(3) a controlling interest or operational control of the
electric utility or transmission and distribution utility will be
transferred.
(m) The commission shall approve a transaction under Subsection
(l) if the commission finds that the transaction is in the public
interest. In making its determination, the commission shall consider
whether the transaction will adversely affect the reliability of
service, availability of service, or cost of service of the electric
utility or transmission and distribution utility. The commission
shall make the determination concerning a transaction under this
subsection not later than the 180th day after the date the commission
receives the relevant report. The commission may extend the deadline
provided by this subsection for not more than 60 days if the
commission determines the extension is needed to evaluate additional
information, to consider actions taken by other jurisdictions
concerning the transaction, to provide for administrative efficiency,
or for other good cause. If the commission has not made a
determination before the expiration of the deadline provided by or
extended under this subsection, the transaction is considered
approved.
(n) Subsections (l) and (m) do not apply to a transaction
described by Subsection (l) for which a definitive agreement was
executed before April 1, 2007, if an electric utility or transmission
and distribution utility or a person seeking to acquire or merge with
an electric utility or transmission and distribution utility made a
filing for review of the transaction under Section 14.101 before May
1, 2007, and the resulting proceeding was not withdrawn.
(o) If an electric utility or transmission and distribution
utility or a person seeking to acquire or merge with an electric
utility or transmission and distribution utility files with the
commission a stipulation, representation, or commitment in advance of
or as part of a filing under Subsection (l) or under Section 14.101,
the commission may enforce the stipulation, representation, or
commitment to the extent that the stipulation, representation, or
commitment is consistent with the standards provided by this section
and Section 14.101. The commission may reasonably interpret and
enforce conditions adopted under this section.

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Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.
Amended by:
Acts 2007, 80th Leg., R.S., Ch. 1186 (H.B. 624), Sec. 1, eff.
June 15, 2007.
Acts 2017, 85th Leg., R.S., Ch. 200 (S.B. 735), Sec. 3, eff. May
27, 2017.

Sec. 39.263. STRANDED COST RECOVERY OF ENVIRONMENTAL CLEANUP

COSTS. (a) Subject to Subsection (c), capital costs incurred by an
electric utility to improve air quality before January 1, 2002, are
eligible for inclusion as net invested capital under Section 39.259,
notwithstanding the limitations imposed under Sections 39.259(b) and
(c).
(b) Subject to Subsection (c), capital costs incurred by an
electric utility or an affiliated power generation company to improve
air quality after January 1, 2002, and before May 1, 2003, are
eligible for inclusion in the determination of invested capital in
the true-up proceeding under Section 39.262.
(c) Reasonable costs incurred under Subsections (a) and (b)
shall be included as invested capital and considered in an electric
utility's stranded cost determination only to the extent that:
(1) the cost is applied to offset or reduce the emission of
airborne contaminants from an electric generating facility, where:
(A) the reduction or offset is determined by the Texas
Natural Resource Conservation Commission to be an essential component
in achieving compliance with a national ambient air quality standard;
or
(B) the reduction or offset is necessary in order for
an unpermitted electric generating facility to obtain a permit in the
manner provided by Section 39.264;
(2) the retrofit decision is determined to be the most
cost-effective after consideration of alternative measures, including
the retirement of the generating facility; and
(3) the amount and location of resulting emission
reductions is consistent with the air quality goals and policies of
the Texas Natural Resource Conservation Commission.
(d) If the retirement of a generating facility is the most
cost-effective alternative, taking into account the cost of
replacement generating capacity, the net book value, including

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retirement costs and offsetting salvage value, of the affected

facility shall be included in the electric utility's stranded cost
determination, notwithstanding Section 39.259(c).

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 39.264. EMISSIONS REDUCTIONS OF "GRANDFATHERED

FACILITIES". (a) In this section:
(1) "Conservation commission" means the Texas Natural
Resource Conservation Commission.
(2) "Electric generating facility" means a facility that
generates electric energy for compensation and is owned or operated
by a person in this state, including a municipal corporation,
electric cooperative, or river authority.
(b) This section applies only to an electric generating
facility existing on January 1, 1999, that is not subject to the
requirement to obtain a permit under Section 382.0518(g), Health and
Safety Code.
(c) It is the intent of the legislature that, for the 12-month
period beginning on May 1, 2003, and for each 12-month period after
the end of that period, total annual emissions of nitrogen oxides
from facilities subject to this section may not exceed levels equal
to 50 percent of the total emissions of that pollutant during 1997,
as reported to the conservation commission, and total annual
emissions of sulphur dioxides from coal-fired facilities subject to
this section may not exceed levels equal to 75 percent of the total
emissions of that pollutant during 1997, as reported to the
conservation commission. The limitations prescribed by this
subsection may be met through an emissions allocation and allowance
transfer system described by this section.
(d) A municipal corporation, electric cooperative, or river
authority may exclude any electric generating facilities of 25
megawatts or less from the requirements prescribed by this section.
Not later than January 1, 2000, a municipal corporation, electric
cooperative, or river authority must inform the conservation
commission of its intent to exclude those facilities.
(e) The owner or operator of an electric generating facility
shall apply to the conservation commission for a permit for the
emission of air contaminants on or before September 1, 2000. A

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permit issued by the conservation commission under this section shall

require the facility to achieve emissions reductions or trading
emissions allowances as provided by this section. If the facility
uses coal as a fuel, the permit must also be conditioned on the
facility's emissions meeting opacity limitations provided by
conservation commission rules. Notwithstanding Section 382.0518(g),
Health and Safety Code, a facility that does not obtain a permit as
required by this subsection may not operate after May 1, 2003, unless
the conservation commission finds good cause for an extension.
(f) The conservation commission shall develop rules for the
permitting of electric generating facilities. The rules adopted
under this subsection shall provide, by region, for the allocation of
emissions allowances of sulphur dioxides and nitrogen oxides among
electric generating facilities and for facilities to trade emissions
allowances for those contaminants.
(g) The conservation commission by rule shall establish an East
Texas Region, a West Texas Region, and an El Paso Region for
allocation of air contaminants under the permitting program under
Subsection (f). The East Texas Region must contain all counties
traversed by or east of Interstate Highway 35 or Interstate Highway
37, including Bosque, Coryell, Hood, Parker, Somervell, and Wise
counties. The West Texas Region includes all of the state not
contained in the East Texas Region or the El Paso Region. The El
Paso Region includes El Paso County.
(h) Not later than January 1, 2000, the conservation commission
shall allocate to each electric generating facility in each region a
number of annual emissions allowances, with each allowance equal to
one ton of sulphur dioxides or of nitrogen oxides emitted in a year,
that permit emissions of the contaminants from the facility in that
year. The conservation commission must allocate to each facility a
number of emissions allowances equal to an emissions rate measured in
pounds per million British thermal units divided by 2,000 and
multiplied by the facility's total heat input in terms of million
British thermal units during 1997. For the East Texas Region, the
emissions rate shall be 0.14 pounds per million British thermal units
for nitrogen oxides and 1.38 pounds per million British thermal units
for sulphur dioxides. For the West Texas and El Paso regions, the
emissions rate shall be 0.195 pounds per million British thermal
units for nitrogen oxides. Allowances for sulphur dioxides may only
be allocated among coal-fired facilities.

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(i) A person, municipal corporation, electric cooperative, or

river authority that owns and operates an electric generating
facility not covered by this section may elect to designate that
facility to become subject to the requirements of this section and to
receive emissions allowances for the purpose of complying with the
emissions limitations prescribed by Subsection (c). The conservation
commission shall adopt rules governing this election that:
(1) require an owner or operator of an electric generating
facility to designate to the conservation commission in its permit
application under Subsection (e) any facilities that will become
subject to this section;
(2) require the conservation commission, notwithstanding
the allocation mechanism provided by Subsection (h), to allocate
additional allowances to facilities governed by this subsection in an
amount equal to each facility's actual emissions in tons in 1997;
(3) provide that any unit designated under this subsection
may not transfer or bank allowances conserved as a result of reduced
utilization or shutdown, except that the allowances may be
transferred or carried forward for use in subsequent years to the
extent that the reduced utilization or shutdown results from the
replacement of thermal energy from the unit designated under this
subsection with thermal energy generated by any other unit; and
(4) provide that emissions reductions from electing
facilities designated in this subsection may only be used to satisfy
the emissions reductions for grandfathered facilities defined in
Subsection (c) to the extent that reductions used to satisfy the
limitations in Subsection (c) are beyond the requirements of any
other state or federal standard, or both.
(j) The conservation commission by rule shall permit a facility
to trade emissions allocations with other electric generating
facilities only in the same region.
(k) The conservation commission by rule shall provide methods
for the conservation commission to determine whether a facility
complies with the permit issued under this section. The rules must
provide for:
(1) monitoring and reporting actual emissions of sulphur
dioxides and nitrogen oxides from each facility;
(2) provisions for saving unused allowances for use in
later years; and
(3) a system for tracking traded allowances.

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(l) A facility may not trade an unused allowance for a

contaminant for use as a credit for another contaminant.
(m) A person possessing market power shall not withhold
emissions allowances from the market in a manner that is unreasonably
discriminatory or tends to unreasonably restrict, impair, or reduce
the level of competition.
(n) The conservation commission shall penalize a facility that
emits an air contaminant that exceeds the facility's allowances for
that contaminant by:
(1) enforcing an administrative penalty, in an amount
determined by conservation commission rules, for each ton of air
contaminant emissions by which the facility exceeds its allocated
emissions allowances; and
(2) reducing the facility's emissions allowances for the
next year by an amount of emissions equal to the excessive emissions
in the year the facility emitted the excessive air contaminants.
(o) The conservation commission may penalize a facility that
emits an air contaminant that exceeds the facility's allowances for
that contaminant by:
(1) ordering the facility to cease operations; or
(2) taking other enforcement action provided by
conservation commission rules.
(p) The conservation commission by rule shall provide for a
facility in the El Paso Region to meet emissions allowances by using
credits from emissions reductions achieved in Ciudad Juarez, United
Mexican States.
(q) If the conservation commission or the United States
Environmental Protection Agency determines that reductions in
nitrogen oxides emissions in the El Paso Region otherwise required by
this section would result in increased ambient ozone levels in El
Paso County, facilities in the El Paso Region are exempt from the
nitrogen oxides reduction requirements.
(r) An applicant for a permit under Subsection (e) shall
publish notice of intent to obtain the permit in accordance with
Section 382.056, Health and Safety Code. The conservation commission
shall provide an opportunity for a public hearing and the submission
of public comment and send notice of a decision on an application for
a permit under Subsection (e) in the same manner as provided by
Sections 382.0561 and 382.0562, Health and Safety Code. The
conservation commission shall review and renew a permit issued under

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this section in accordance with Section 382.055, Health and Safety

Code.
(s) This section does not limit the authority of the
conservation commission to require further reductions of nitrogen
oxides, sulphur dioxides, or any other pollutant from generating
facilities subject to this section or Section 39.263.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 39.265. RIGHTS NOT AFFECTED. This chapter is not intended

to alter any rights of utilities to recover stranded costs from
wholesale customers.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

SUBCHAPTER G. SECURITIZATION
Sec. 39.301. PURPOSE. The purpose of this subchapter is to
enable utilities to use securitization financing to recover
regulatory assets, all other amounts determined under Section 39.262,
and any amounts being recovered under a competition transition charge
determined as a result of the proceedings under Sections 39.201 and
39.262. This type of debt will lower the carrying costs of the assets
relative to the costs that would be incurred using conventional
utility financing methods. The proceeds of the transition bonds
shall be used solely for the purposes of reducing the amount of
recoverable regulatory assets and other amounts, as determined by the
commission in accordance with this chapter, through the refinancing
or retirement of utility debt or equity. The commission shall ensure
that securitization provides tangible and quantifiable benefits to
ratepayers, greater than would have been achieved absent the issuance
of transition bonds. The commission shall ensure that the
structuring and pricing of the transition bonds result in the lowest
transition bond charges consistent with market conditions and the
terms of the financing order. The amount securitized may not exceed
the present value of the revenue requirement over the life of the
proposed transition bond associated with the regulatory assets or
other amounts sought to be securitized. The present value
calculation shall use a discount rate equal to the proposed interest
rate on the transition bonds.

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Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.
Amended by:
Acts 2007, 80th Leg., R.S., Ch. 1186 (H.B. 624), Sec. 2, eff.
June 15, 2007.

Sec. 39.302. DEFINITIONS. In this subchapter:

(1) "Assignee" means any individual, corporation, or other
legally recognized entity to which an interest in transition property
is transferred, other than as security, including any assignee of
that party.
(2) "Financing order" means an order of the commission
adopted under Section 39.201 or 39.262 approving the issuance of
transition bonds and the creation of transition charges for the
recovery of qualified costs.
(3) "Financing party" means a holder of transition bonds,
including trustees, collateral agents, and other persons acting for
the benefit of the holder.
(4) "Qualified costs" means 100 percent of an electric
utility's regulatory assets and 75 percent of its recoverable costs
determined by the commission under Section 39.201 and any remaining
amounts determined under Section 39.262 together with the costs of
issuing, supporting, and servicing transition bonds and any costs of
retiring and refunding the electric utility's existing debt and
equity securities in connection with the issuance of transition
bonds. The term includes the costs to the commission of acquiring
professional services for the purpose of evaluating proposed
transactions under Section 39.201 and this subchapter.
(5) "Regulatory assets" means the generation-related
portion of the Texas jurisdictional portion of the amount reported by
the electric utility in its 1998 annual report on Securities and
Exchange Commission Form 10-K as regulatory assets and liabilities,
offset by the applicable portion of generation-related investment tax
credits permitted under the Internal Revenue Code of 1986.
(6) "Transition bonds" means bonds, debentures, notes,
certificates of participation or of beneficial interest, or other
evidences of indebtedness or ownership that are issued by an electric
utility, its successors, or an assignee under a financing order, that
have a term not longer than 15 years, and that are secured by or
payable from transition property. If certificates of participation,

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beneficial interest, or ownership are issued, references in this

subchapter to principal, interest, or premium shall refer to
comparable amounts under those certificates.
(7) "Transition charges" means nonbypassable amounts to be
charged for the use or availability of electric services, approved by
the commission under a financing order to recover qualified costs,
that shall be collected by an electric utility, its successors, an
assignee, or other collection agents as provided for in the financing
order.
(8) "Transition property" means the property described in
Section 39.304.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.
Amended by:
Acts 2007, 80th Leg., R.S., Ch. 1186 (H.B. 624), Sec. 3, eff.
June 15, 2007.

Sec. 39.303. FINANCING ORDERS; TERMS. (a) The commission

shall adopt a financing order, on application of a utility to recover
the utility's regulatory assets and other amounts determined under
Section 39.201 or 39.262, on making a finding that the total amount
of revenues to be collected under the financing order is less than
the revenue requirement that would be recovered over the remaining
life of the regulatory assets or other amounts using conventional
financing methods and that the financing order is consistent with the
standards in Section 39.301.
(b) The financing order shall detail the amount of regulatory
assets and other amounts to be recovered and the period over which
the nonbypassable transition charges shall be recovered, which period
may not exceed 15 years. If an amount determined under Section
39.262 is subject to judicial review at the time of the
securitization proceeding, the financing order shall include an
adjustment mechanism requiring the utility to adjust its rates, other
than transition charges, or provide credits, other than credits to
transition charges, in a manner that would refund over the remaining
life of the transition bonds any overpayments resulting from
securitization of amounts in excess of the amount resulting from a
final determination after completion of all appellate reviews. The
adjustment mechanism may not affect the stream of revenue available

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to service the transition bonds. An adjustment may not be made under

this subsection until all appellate reviews, including, if
applicable, appellate reviews following a commission decision on
remand of its original orders, have been completed.
(c) Transition charges shall be collected and allocated among
customers in the same manner as competition transition charges under
Section 39.201.
(d) A financing order shall become effective in accordance with
its terms, and the financing order, together with the transition
charges authorized in the order, shall thereafter be irrevocable and
not subject to reduction, impairment, or adjustment by further action
of the commission, except as permitted by Section 39.307.
(e) The commission shall issue a financing order under
Subsections (a) and (g) not later than 90 days after the utility
files its request for the financing order.
(f) A financing order is not subject to rehearing by the
commission. A financing order may be reviewed by appeal only to a
Travis County district court by a party to the proceeding filed
within 15 days after the financing order is signed by the commission.
The judgment of the district court may be reviewed only by direct
appeal to the Supreme Court of Texas filed within 15 days after entry
of judgment. All appeals shall be heard and determined by the
district court and the Supreme Court of Texas as expeditiously as
possible with lawful precedence over other matters. Review on appeal
shall be based solely on the record before the commission and briefs
to the court and shall be limited to whether the financing order
conforms to the constitution and laws of this state and the United
States and is within the authority of the commission under this
chapter.
(g) At the request of an electric utility, the commission may
adopt a financing order providing for retiring and refunding
transition bonds on making a finding that the future transition
charges required to service the new transition bonds, including
transaction costs, will be less than the future transition charges
required to service the transition bonds being refunded. On the
retirement of the refunded transition bonds, the commission shall
adjust the related transition charges accordingly.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.
Amended by:

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Acts 2007, 80th Leg., R.S., Ch. 1186 (H.B. 624), Sec. 4, eff.
June 15, 2007.

Sec. 39.304. PROPERTY RIGHTS. (a) The rights and interests of

an electric utility or successor under a financing order, including
the right to impose, collect, and receive transition charges
authorized in the order, shall be only contract rights until they are
first transferred to an assignee or pledged in connection with the
issuance of transition bonds, at which time they will become
"transition property."
(b) Transition property shall constitute a present property
right for purposes of contracts concerning the sale or pledge of
property, even though the imposition and collection of transition
charges depends on further acts of the utility or others that have
not yet occurred. The financing order shall remain in effect and the
property shall continue to exist for the same period as the pledge of
the state described in Section 39.310.
(c) All revenues and collections resulting from transition
charges shall constitute proceeds only of the transition property
arising from the financing order.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 39.305. NO SETOFF. The interest of an assignee or pledgee

in transition property and in the revenues and collections arising
from that property are not subject to setoff, counterclaim,
surcharge, or defense by the electric utility or any other person or
in connection with the bankruptcy of the electric utility or any
other entity. A financing order shall remain in effect and unabated
notwithstanding the bankruptcy of the electric utility, its
successors, or assignees.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 39.306. NO BYPASS. A financing order shall include terms

ensuring that the imposition and collection of transition charges
authorized in the order shall be nonbypassable.

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Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 39.307. TRUE-UP. A financing order shall include a

mechanism requiring that transition charges be reviewed and adjusted
at least annually, within 45 days of the anniversary date of the
issuance of the transition bonds, to correct any overcollections or
undercollections of the preceding 12 months and to ensure the
expected recovery of amounts sufficient to timely provide all
payments of debt service and other required amounts and charges in
connection with the transition bonds.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 39.308. TRUE SALE. An agreement by an electric utility or

assignee to transfer transition property that expressly states that
the transfer is a sale or other absolute transfer signifies that the
transaction is a true sale and is not a secured transaction and that
title, legal and equitable, has passed to the entity to which the
transition property is transferred. This true sale shall apply
regardless of whether the purchaser has any recourse against the
seller, or any other term of the parties' agreement, including the
seller's retention of an equity interest in the transition property,
the fact that the electric utility acts as the collector of
transition charges relating to the transition property, or the
treatment of the transfer as a financing for tax, financial
reporting, or other purposes.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 39.309. SECURITY INTERESTS; ASSIGNMENT; COMMINGLING;

DEFAULT. (a) Transition property does not constitute an account or
general intangible under Section 9.106, Business & Commerce Code.
The creation, granting, perfection, and enforcement of liens and
security interests in transition property are governed by this
section and not by the Business & Commerce Code.
(b) A valid and enforceable lien and security interest in
transition property may be created only by a financing order and the
execution and delivery of a security agreement with a financing party

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in connection with the issuance of transition bonds. The lien and

security interest shall attach automatically from the time that value
is received for the bonds and, on perfection through the filing of
notice with the secretary of state in accordance with the rules
prescribed under Subsection (d), shall be a continuously perfected
lien and security interest in the transition property and all
proceeds of the property, whether accrued or not, shall have priority
in the order of filing and take precedence over any subsequent
judicial or other lien creditor. If notice is filed within 10 days
after value is received for the transition bonds, the security
interest shall be perfected retroactive to the date value was
received, otherwise, the security interest shall be perfected as of
the date of filing.
(c) Transfer of an interest in transition property to an
assignee shall be perfected against all third parties, including
subsequent judicial or other lien creditors, when the financing order
becomes effective, transfer documents have been delivered to the
assignee, and a notice of that transfer has been filed in accordance
with the rules prescribed under Subsection (d); provided, however,
that if notice of the transfer has not been filed in accordance with
this subsection within 10 days after the delivery of transfer
documentation, the transfer of the interest is not perfected against
third parties until the notice is filed.
(d) The secretary of state shall implement this section by
establishing and maintaining a separate system of records for the
filing of notices under this section and prescribing the rules for
those filings based on Chapter 9, Business & Commerce Code, adapted
to this subchapter and using the terms defined in this subchapter.
(e) The priority of a lien and security interest perfected
under this section is not impaired by any later modification of the
financing order under Section 39.307 or by the commingling of funds
arising from transition charges with other funds, and any other
security interest that may apply to those funds shall be terminated
when they are transferred to a segregated account for the assignee or
a financing party. If transition property has been transferred to an
assignee, any proceeds of that property shall be held in trust for
the assignee.
(f) If a default or termination occurs under the transition
bonds, the financing parties or their representatives may foreclose
on or otherwise enforce their lien and security interest in any

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transition property as if they were secured parties under Chapter 9,

Business & Commerce Code, and the commission may order that amounts
arising from transition charges be transferred to a separate account
for the financing parties' benefit, to which their lien and security
interest shall apply. On application by or on behalf of the
financing parties, a district court of Travis County shall order the
sequestration and payment to them of revenues arising from the
transition charges.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 39.310. PLEDGE OF STATE. Transition bonds are not a debt

or obligation of the state and are not a charge on its full faith and
credit or taxing power. The state pledges, however, for the benefit
and protection of financing parties and the electric utility, that it
will not take or permit any action that would impair the value of
transition property, or, except as permitted by Section 39.307,
reduce, alter, or impair the transition charges to be imposed,
collected, and remitted to financing parties, until the principal,
interest and premium, and any other charges incurred and contracts to
be performed in connection with the related transition bonds have
been paid and performed in full. Any party issuing transition bonds
is authorized to include this pledge in any documentation relating to
those bonds.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 39.311. TAX EXEMPTION. Transactions involving the

transfer and ownership of transition property and the receipt of
transition charges are exempt from state and local income, sales,
franchise, gross receipts, and other taxes or similar charges.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 39.312. NOT PUBLIC UTILITY. An assignee or financing

party may not be considered to be a public utility or person
providing electric service solely by virtue of the transactions
described in this subchapter.

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Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 39.313. SEVERABILITY. Effective on the date the first

utility transition bonds are issued under this subchapter, if any
provision in this title or portion of this title is held to be
invalid or is invalidated, superseded, replaced, repealed, or expires
for any reason, that occurrence does not affect the validity or
continuation of this subchapter, Section 39.201, 39.251, 39.252, or
39.262, or any part of those provisions, or any other provision of
this title that is relevant to the issuance, administration, payment,
retirement, or refunding of transition bonds or to any actions of the
electric utility, its successors, an assignee, a collection agent, or
a financing party, which shall remain in full force and effect.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

SUBCHAPTER H. CERTIFICATION AND REGISTRATION; PENALTIES

Sec. 39.351. REGISTRATION OF POWER GENERATION COMPANIES. (a)
A person may not generate electricity unless:
(1) the person is registered with the commission as a power
generation company in accordance with this section; or
(2) the electricity is generated as part of a registered
aggregate distributed energy resource under Section 39.3515.
(a-1) A person may register as a power generation company by
filing the following information with the commission:
(1) a description of the location of any facility used to
generate electricity;
(2) a description of the type of services provided;
(3) a copy of any information filed with the Federal Energy
Regulatory Commission in connection with registration with that
commission; and
(4) any other information required by commission rule,
provided that in requiring that information the commission shall
protect the competitive process in a manner that ensures the
confidentiality of competitively sensitive information.
(b) A power generation company shall comply with the
reliability standards adopted by an independent organization
certified by the commission to ensure the reliability of the regional

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electrical network for a power region in which the power generation

company is generating or selling electricity.
(c) The commission may establish simplified filing requirements
for distributed natural gas generation facilities.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.
Amended by:
Acts 2011, 82nd Leg., R.S., Ch. 890 (S.B. 365), Sec. 4, eff.
September 1, 2011.
Acts 2023, 88th Leg., R.S., Ch. 945 (S.B. 1699), Sec. 3, eff.
September 1, 2023.

Sec. 39.3515. AGGREGATE DISTRIBUTED ENERGY RESOURCES. (a) A

person who aggregates distributed energy resources:
(1) is not required to register as a power generation
company to aggregate the resources;
(2) shall comply with rules, guidelines, and registration
requirements established by the commission and by Chapter 17 and this
chapter; and
(3) remains accountable for compliance with the applicable
statutes and rules by a subcontractor, an agent, or any other entity
compensated by the person for activities conducted on the person's
behalf.
(b) The commission may establish rules and registration
requirements for the aggregation of distributed energy resources.

Added by Acts 2023, 88th Leg., R.S., Ch. 945 (S.B. 1699), Sec. 4, eff.
September 1, 2023.

Sec. 39.352. CERTIFICATION OF RETAIL ELECTRIC PROVIDERS. (a)

After the date of customer choice, a person, including an affiliate
of an electric utility, may not provide retail electric service in
this state unless the person is certified by the commission as a
retail electric provider, in accordance with this section.
(b) The commission shall issue a certificate to provide retail
electric service to a person applying for certification who
demonstrates:
(1) the financial and technical resources to provide
continuous and reliable electric service to customers in the area for

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which the certification is sought;

(2) the managerial and technical ability to supply
electricity at retail in accordance with customer contracts;
(3) the resources needed to meet the customer protection
requirements of this title; and
(4) ownership or lease of an office located within this
state for the purpose of providing customer service, accepting
service of process, and making available in that office books and
records sufficient to establish the retail electric provider's
compliance with the requirements of this subchapter.
(c) A person applying for certification under this section
shall comply with all applicable customer protection provisions,
disclosure requirements, and marketing guidelines established by the
commission and by this title.
(d) Notwithstanding Subsections (b)(1)-(3), if a retail
electric provider files with the commission a signed, notarized
affidavit from each retail customer with which it has contracted to
provide one megawatt or more of capacity stating that the customer is
satisfied that the retail electric provider meets the standards
prescribed by Subsections (b)(1)-(3) and Subsection (c), the retail
electric provider shall be certified for purposes of serving those
customers only, so long as it demonstrates that it meets the
requirements of Subsection (b)(4).
(e) A retail electric provider may apply for certification any
time after September 1, 2000.
(f) The commission shall use any information required in this
section in a manner that ensures the confidentiality of competitively
sensitive information.
(g) If a retail electric provider serves an aggregate load in
excess of 300 megawatts within this state, not less than five percent
of the load in megawatt hours must consist of residential customers.
This requirement applies to an affiliated retail electric provider
only with respect to load served outside of the electric utility's
service area, and, in relation to that load, the affiliated retail
electric provider shall meet the requirements of this subsection by
serving residential customers outside of the electric utility's
service area. For the purpose of this subsection, the load served by
retail electric providers that are under common ownership shall be
combined. A retail electric provider may meet the requirements of
this subsection by demonstrating on an annual basis that it serves

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residential load amounting to five percent of its total load or by

demonstrating that another retail electric provider serves sufficient
qualifying residential load on its behalf. Qualifying residential
load may not include customers served by an affiliated retail
electric provider in its own service area. Each retail electric
provider shall file reports with the commission that are necessary to
implement this subsection. This subsection applies for 36 months
after retail competition begins. The commission shall adopt rules to
implement this subsection.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.
Amended by:
Acts 2019, 86th Leg., R.S., Ch. 467 (H.B. 4170), Sec. 16.002,
eff. September 1, 2019.

Sec. 39.353. REGISTRATION OF AGGREGATORS. (a) A person may

not provide aggregation services in the state unless the person is
registered with the commission as an aggregator.
(b) In this subchapter, "aggregator" means a person joining two
or more customers, other than municipalities and political
subdivision corporations, into a single purchasing unit to negotiate
the purchase of electricity from retail electric providers.
Aggregators may not sell or take title to electricity. Retail
electric providers are not aggregators.
(c) A person registering under this section shall comply with
all customer protection provisions, all disclosure requirements, and
all marketing guidelines established by the commission and by this
title.
(d) The commission shall establish terms and conditions it
determines necessary to regulate the reliability and integrity of
aggregators in the state by June 1, 2000.
(e) An aggregator may register any time after September 1,
2000.
(f) The commission shall have up to 60 days to process
applications for registration filed by aggregators.
(g) Registration is not required of a customer that is
aggregating loads from its own location or facilities.
(h) The commission shall work with the Texas Department of
Economic Development to communicate information about opportunities

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for operation as aggregators to potential new aggregators, including

small and historically underutilized businesses.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 39.3535. MILITARY BASES AGGREGATORS. (a) In this

section, "military bases aggregator" means a person joining two or
more military bases that are located in areas of the state offering
customer choice under this chapter into a single purchasing unit to
negotiate electricity purchases from retail electric providers.
(b) It is the policy of this state to encourage military bases
located in areas of the state offering customer choice under this
chapter to aggregate their facilities into a single purchasing unit
as a method to reduce costs of electricity consumed by those bases.
The commission shall provide assistance to a military bases
aggregator regarding the evaluation of offers from retail electric
providers on the request of the military bases aggregator.
(c) An aggregator registered under another section of this
subchapter may provide aggregation services to military bases.
(d) A person, including a state agency, may register as a
military bases aggregator to provide aggregation services exclusively
to military bases located in areas of the state offering customer
choice under this chapter.
(e) A person registered as a military bases aggregator under
Subsection (d) is not required to comply with customer protection
provisions, disclosure requirements, or marketing guidelines
prescribed by this title or established by the commission while
providing aggregation services exclusively to military bases.
(f) The commission shall expedite consideration of an
application submitted by an applicant for registration under
Subsection (d).

Added by Acts 2003, 78th Leg., ch. 149, Sec. 22, eff. May 27, 2003.

Sec. 39.354. REGISTRATION OF MUNICIPAL AGGREGATORS. (a) A

municipal aggregator may not provide aggregation services in the
state unless the municipal aggregator registers with the commission.
(b) In this section, "municipal aggregator" means a person
authorized by two or more municipal governing bodies to join the

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bodies into a single purchasing unit to negotiate the purchase of

electricity from retail electric providers or aggregation by a
municipality under Chapter 304, Local Government Code.
(c) A municipal aggregator may register any time after
September 1, 2000.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999;
Acts 2001, 77th Leg., ch. 1420, Sec. 21.002(22), eff. Sept. 1, 2001.

Sec. 39.3545. REGISTRATION OF POLITICAL SUBDIVISION

AGGREGATORS. (a) A political subdivision aggregator may not provide
aggregation services in the state unless the political subdivision
aggregator registers with the commission.
(b) In this section, "political subdivision aggregator" means a
person or political subdivision corporation authorized by two or more
political subdivision governing bodies to join the bodies into a
single purchasing unit or multiple purchasing units to negotiate the
purchase of electricity from retail electric providers for the
facilities of the aggregated political subdivisions or aggregation by
a person or political subdivision under Chapter 304, Local Government
Code.
(c) A political subdivision aggregator may register any time
after September 1, 2000.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999;
Acts 2001, 77th Leg., ch. 1420, Sec. 21.002(23), eff. Sept. 1, 2001.

Sec. 39.355. REGISTRATION OF POWER MARKETERS. A person may not

sell electric energy at wholesale as a power marketer unless the
person registers with the commission pursuant to Section 35.032.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 39.3555. REGISTRATION OF BROKERS. (a) In this section,

"brokerage services" means providing advice or procurement services
to, or acting on behalf of, a retail electric customer regarding the
selection of a retail electric provider, or a product or service
offered by a retail electric provider.

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(b) A person may not provide brokerage services, including

brokerage services offered online, in this state for compensation or
other consideration unless the person is registered with the
commission as a broker.
(c) A retail electric provider may not register as a broker. A
broker may not sell or take title to electric energy.
(d) A retail electric provider may not knowingly provide bids
or offers to a person who:
(1) provides brokerage services in this state for
compensation or other consideration; and
(2) has not registered as a broker with the commission.
(e) A person who registers under this section shall comply with
customer protection provisions, disclosure requirements, and
marketing guidelines established by the commission and by this
chapter and Chapter 17.
(f) The commission shall adopt rules as necessary to implement
this section.
(g) The commission shall process a person's application for
registration as a broker not later than the 60th day after the date
the person files the application.

Added by Acts 2019, 86th Leg., R.S., Ch. 1373 (S.B. 1497), Sec. 1,
eff. September 1, 2019.

Sec. 39.356. REVOCATION OF CERTIFICATION. (a) The commission

may suspend, revoke, or amend a retail electric provider's
certificate for significant violations of this title or the rules
adopted under this title or of any reliability standard adopted by an
independent organization certified by the commission to ensure the
reliability of a power region's electrical network, including the
failure to observe any scheduling, operating, planning, reliability,
or settlement protocols established by the independent organization.
The commission may also suspend or revoke a retail electric
provider's certificate if the provider no longer has the financial or
technical capability to provide continuous and reliable electric
service.
(b) The commission may suspend or revoke a power generation
company's registration for significant violations of this title or
the rules adopted under this title or of the reliability standards

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adopted by an independent organization certified by the commission to

ensure the reliability of a power region's electrical network,
including the failure to observe any scheduling, operating, planning,
reliability, or settlement protocols established by the independent
organization.
(c) The commission may suspend or revoke an aggregator's
registration for significant violations of this title or of the rules
adopted under this title.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 39.357. ADMINISTRATIVE PENALTY. In addition to the

suspension, revocation, or amendment of a certification, the
commission may impose an administrative penalty, as provided by
Section 15.023, for violations described by Section 39.356.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 39.358. LOCAL REGISTRATION OF RETAIL ELECTRIC PROVIDER.

(a) A municipality may require a retail electric provider to
register with the municipality as a condition of serving residents of
the municipality. The municipality may assess a reasonable
administrative fee for this purpose.
(b) The municipality may suspend or revoke a retail electric
provider's registration and operation in that municipality for
significant violations of this chapter or the rules adopted under
this chapter.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 39.359. BILL PAYMENT ASSISTANCE FOR BURNED VETERANS. (a)

A retail electric provider may establish a bill payment assistance
program for a customer who is a military veteran who a medical doctor
certifies has a significantly decreased ability to regulate the
individual's body temperature because of severe burns received in
combat.
(b) The commission shall compile a list of programs described
by Subsection (a) that are available from retail electric providers.

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The commission shall publish the list on the commission's Internet

website and the office shall provide on the office's Internet website
a link to the list.
(c) A retail electric provider shall provide to the commission
information necessary to compile the list in the form, manner, and
frequency the commission by rule requires.

Added by Acts 2013, 83rd Leg., R.S., Ch. 597 (S.B. 981), Sec. 2, eff.
June 14, 2013.

Text of section as added by Acts 2023, 88th Leg., R.S., Ch. 464 (S.B.
2013), Sec. 5
For text of section as added by Acts 2023, 88th Leg., R.S., Ch. 463
(S.B. 1929), Sec. 1, see other Sec. 39.360.
Sec. 39.360. TRANSACTIONS WITH CERTAIN FOREIGN-OWNED COMPANIES
IN CONNECTION WITH CRITICAL INFRASTRUCTURE. (a) In this section,
"company" and "critical infrastructure" have the meanings assigned by
Section 113.001, Business & Commerce Code, as added by Chapter 975
(S.B. 2116), Acts of the 87th Legislature, Regular Session, 2021.
(b) An independent organization certified under Section 39.151
may not register a business entity or maintain the registration of a
business entity to operate in the power region for which the
independent organization is certified unless the business entity
attests that the entity complies with Chapter 113, Business &
Commerce Code, as added by Chapter 975 (S.B. 2116), Acts of the 87th
Legislature, Regular Session, 2021.
(c) An independent organization certified under Section 39.151
shall require as a condition of operating in the power region for
which the independent organization is certified that a business
entity report to the independent organization the purchase of any
critical electric grid equipment or service from a company described
by Section 113.002(a)(2), Business & Commerce Code, as added by
Chapter 975 (S.B. 2116), Acts of the 87th Legislature, Regular
Session, 2021.
(d) For each purchase reported by a business entity under
Subsection (c), the business entity shall submit an attestation to
the independent organization that the purchase will not result in
access to or control of its critical electric grid equipment by a
company described by Section 113.002(a)(2), Business & Commerce Code,

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as added by Chapter 975 (S.B. 2116), Acts of the 87th Legislature,

Regular Session, 2021, excluding access specifically allowed by the
business entity for product warranty and support purposes.
(e) Notwithstanding any other law, an independent organization
certified under Section 39.151 may immediately suspend or terminate a
company's registration or access to any of the independent
organization's systems if the independent organization has a
reasonable suspicion that the company meets any of the criteria
described by Section 2274.0102(a)(2), Government Code, as added by
Chapter 975 (S.B. 2116), Acts of the 87th Legislature, Regular
Session, 2021.
(f) A contractual provision that limits or contradicts
Subsection (e) is contrary to public policy and is unenforceable and
void.
(g) An independent organization certified under Section 39.151
may adopt guidelines or procedures relating to the requirements in
this section, including the qualification of electric grid equipment
or services as critical.
(h) The commission shall adopt any rules necessary to
administer this section or authorize an independent organization to
carry out a duty imposed by this section.
(i) The attorney general may conduct periodic audits of the
attestations required by Subsection (d) and may prioritize the audits
as necessary to protect critical infrastructure.

Added by Acts 2023, 88th Leg., R.S., Ch. 464 (S.B. 2013), Sec. 5, eff.
June 9, 2023.

Text of section as added by Acts 2023, 88th Leg., R.S., Ch. 463 (S.B.
1929), Sec. 1
For text of section as added by Acts 2023, 88th Leg., R.S., Ch. 464
(S.B. 2013), Sec. 5, see other Sec. 39.360.
Sec. 39.360. LARGE FLEXIBLE LOAD REGISTRATION. (a) In this
section:
(1) "Virtual currency" has the meaning assigned by Section
12.001, Business & Commerce Code.
(2) "Virtual currency mining facility" means a facility
that uses electronic equipment to add virtual currency transactions
to a distributed ledger.

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(b) The commission by rule shall require a person operating a

virtual currency mining facility who enters into an agreement for
retail electric service in the ERCOT power region to register the
facility receiving service as a large flexible load under this
section if:
(1) the facility requires a total load of more than 75
megawatts; and
(2) the facility load is interruptible.
(c) The rules must require a person described by Subsection (b)
to:
(1) register the large flexible load with the commission
not later than one business day after the date the agreement begins;
and
(2) provide the commission with:
(A) the location of the facility; and
(B) the anticipated demand from the facility for the
five-year period beginning on the date of the registration.
(d) The commission by rule shall:
(1) adopt criteria for determining whether a load is
interruptible for the purposes of this section based on whether it is
possible for the facility operator to choose to interrupt the load;
and
(2) establish a method to ensure compliance with this
section.
(e) The commission may share with an independent organization
certified under Section 39.151 registration information received
under this section.

Added by Acts 2023, 88th Leg., R.S., Ch. 463 (S.B. 1929), Sec. 1, eff.
September 1, 2023.

SUBCHAPTER I. PROVISIONS FOR CERTAIN NON-ERCOT UTILITIES

Sec. 39.401. APPLICABILITY. This subchapter shall apply to
investor-owned electric utilities operating solely outside of ERCOT
having fewer than six synchronous interconnections with voltage
levels above 69 kilovolts systemwide on the effective date of this
subchapter. The legislature finds that circumstances exist that
require that areas served by such utilities be treated as competitive
development areas in which it is not in the public interest to

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transition to full retail customer choice at this time.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.
Amended by Acts 2001, 77th Leg., ch. 1041, Sec. 1, eff. June 15,
2001.

Sec. 39.402. REGULATION OF UTILITY AND TRANSITION TO

COMPETITION. (a) Until the date on which an electric utility
subject to this subchapter is authorized by the commission to
implement customer choice, the rates of the utility shall be
regulated under traditional cost of service regulation and the
utility is subject to all applicable regulatory authority prescribed
by this subtitle and Subtitle A, including Chapters 14, 32, 33, 36,
and 37. Until the date on which an electric utility subject to this
subchapter implements customer choice, the provisions of this
chapter, other than this subchapter, Sections 39.1516 and 39.905, and
the provisions relating to the duty to obtain a permit from the Texas
Commission on Environmental Quality for an electric generating
facility and to reduce emissions from an electric generating
facility, shall not apply to that utility. That portion of any
commission order entered before September 1, 2001, to comply with
this subchapter shall be null and void.
(b) Until the date on which an electric utility subject to this
subchapter implements customer choice, Section 33.008 does not apply
and the utility shall pay franchise fees to a municipality as
required by the utility's franchise agreement with the municipality.
After the date on which an electric utility subject to this
subchapter implements customer choice, Section 33.008 applies.
However, for purposes of computing the franchise fees as provided by
Section 33.008(b), the calendar year immediately preceding the
implementation of customer choice shall be substituted for the year
1998.
(c) On or after January 1, 2007, an electric utility subject to
this subchapter may choose to participate in customer choice. An
electric utility that chooses to participate in customer choice shall
file a transition to competition plan with the commission. This
transition to competition plan shall identify how utilities subject
to this subchapter intend to mitigate market power and achieve full
customer choice, including specific alternatives for constructing

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additional transmission facilities, auctioning rights to generation

capacity, divesting generation capacity, or any other measure that is
consistent with the public interest. The utility shall also include
in the transition to competition plan a provision to establish a
price to beat for residential customers and commercial customers
having a peak load of 1,000 kilowatts or less. The commission may
prescribe additional information or provisions that must be included
in the plan. The commission shall approve, modify, or reject a plan
within 180 days after the date of a filing under this section;
provided, however, that if a hearing is requested by any party to the
proceeding, the 180-day deadline will be extended one day for each
day of hearings. The transition to competition plan may be updated
or amended annually, subject to commission approval until the
applicable power region is certified as a qualifying power region
under Section 39.152.
(d) On implementation of customer choice, an electric utility
subject to this subchapter is subject to the provisions of this
subtitle and Subtitle A to the same extent as other electric
utilities, including the provisions of Chapter 37 concerning
certificates of convenience and necessity.
(e) Notwithstanding Subsection (a), an electric utility subject
to this subchapter that elects to deploy advanced metering and meter
information networks may recover reasonable and necessary costs
incurred in deploying advanced metering and meter information
networks. An electric utility that elects to deploy advanced metering
or meter information networks is subject to commission rules adopted
under Sections 39.107(h) and (k). The commission shall ensure that
any deployment plan approved under this section and any related
customer surcharge:
(1) are not applicable to customer accounts that receive
service at transmission voltage; and
(2) are consistent with commission rules related to
advanced metering systems regarding:
(A) customer protections;
(B) data security, privacy, and ownership; and
(C) options given consumers to continue to receive
service through a non-advanced meter.
(f) An electric utility subject to this subchapter that elects
to deploy an advanced meter information network shall deploy the
network as rapidly as practicable to allow customers to better manage

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energy use and control costs.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.
Amended by Acts 2001, 77th Leg., ch. 1041, Sec. 1, eff. June 15,
2001.
Amended by:
Acts 2011, 82nd Leg., R.S., Ch. 182 (S.B. 1150), Sec. 1, eff. May
28, 2011.
Acts 2019, 86th Leg., R.S., Ch. 170 (H.B. 986), Sec. 1, eff. May
24, 2019.
Acts 2019, 86th Leg., R.S., Ch. 610 (S.B. 936), Sec. 4, eff.
September 1, 2019.
Acts 2023, 88th Leg., R.S., Ch. 410 (H.B. 1500), Sec. 28, eff.
September 1, 2023.

Sec. 39.407. CUSTOMER CHOICE AND RELEVANT MARKET AND RELATED

MATTERS. (a) If an electric utility chooses on or after January 1,
2007, to participate in customer choice, the commission may not
authorize customer choice until the applicable power region has been
certified as a qualifying power region under Section 39.152(a).
Except as otherwise provided by this subsection, the commission shall
certify that the requirements of Section 39.152(a)(3) are met for
electric utilities subject to this subchapter only upon a finding
that the total capacity owned and controlled by each such electric
utility and its affiliates does not exceed 20 percent of the total
installed generation capacity within the constrained geographic
region served by each such electric utility plus the total available
transmission capacity capable of delivering firm power and energy to
that constrained geographic region. Not later than May 1, 2002, each
electric utility subject to this subchapter shall submit to the
electric utility restructuring legislative oversight committee an
analysis of the needed transmission facilities necessary to make the
electric utility's service area transmission capability comparable to
areas within the ERCOT power region. On or after September 1, 2003,
each electric utility subject to this subchapter shall file the
utility's plans to develop the utility's transmission
interconnections with the utility's power region or other adjacent
power regions. The commission shall review the plan and not later
than the 180th day after the date the plan is filed, determine the

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additional transmission facilities necessary to provide access to

power and energy that is comparable to the access provided in areas
within the ERCOT power region; provided, however, that if a hearing
is requested by any party to the proceeding, the 180-day deadline
will be extended one day for each day of hearings. The commission
shall, as a part of the commission's approval of the plan, approve a
rate rider mechanism for the recovery of the incremental costs of
those facilities after the facilities are completed and in-service.
A finding of need under this subsection shall meet the requirements
of Sections 37.056(c)(1), (2), and (4)(E). The commission may
certify that the requirements of Section 39.152(a)(3) are met for
electric utilities subject to this subchapter if the commission finds
that:
(1) each such utility has sufficient transmission
facilities to provide customers access to power and energy from
capacity controlled by suppliers not affiliated with the incumbent
utility that is comparable to the access to power and energy from
capacity controlled by suppliers not affiliated with the incumbent
utilities in areas of the ERCOT power region; and
(2) the total capacity owned and controlled by each such
electric utility and its affiliates does not exceed 20 percent of the
total installed generation capacity within the power region.
(b) In the area of a power region served by an electric utility
subject to this subchapter, the electric utility may not choose to
participate in customer choice unless the affiliated power generation
company makes a commitment to maintain and does maintain rates that
are based on cost of service for any electric cooperative or
municipally owned utility that was a wholesale customer on the date
the utility chooses to participate in customer choice and was
purchasing power at rates that were based on cost of service. This
subsection requires a power generation company to sell power at rates
that are based on cost of service, notwithstanding the expiration of
a contract for that service, until the requirements of Section
39.152(a) are met.
(c) If the requirements of Section 39.152(a) have not been met
for an electric utility subject to this subchapter when the electric
utility chooses to participate in customer choice, then any power
generation company in the power region affiliated with an electric
utility subject to this subchapter shall maintain adequate supply and
facilities to provide electric service to persons who were retail

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customers of the electric utility on the date the utility chooses to

participate in customer choice. The obligation provided by this
subsection remains in effect until the commission determines that the
requirements of Section 39.152(a) have been met for the region.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.
Amended by Acts 2001, 77th Leg., ch. 1041, Sec. 1, eff. June 15,
2001.

For expiration of this section, see Subsection (g).

Sec. 39.408. HIRING ASSISTANCE FOR FEDERAL PROCEEDINGS. (a)
The commission may retain any consultant, accountant, auditor,
engineer, or attorney the commission considers necessary to represent
the commission in a proceeding before the Federal Energy Regulatory
Commission, or before a court reviewing proceedings of that federal
commission, related to:
(1) the relationship of an electric utility subject to this
subchapter to a power region, regional transmission organization, or
independent system operator;
(2) the approval of an agreement among the electric utility
and the electric utility's affiliates concerning the coordination of
the operations of the electric utility and the electric utility's
affiliates; or
(3) other matters related to the electric utility subject
to this subchapter that may affect the ultimate rates paid by retail
customers in this state.
(b) Assistance for which a consultant, accountant, auditor,
engineer, or attorney may be retained under Subsection (a) may
include:
(1) conducting a study;
(2) conducting an investigation;
(3) presenting evidence;
(4) advising the commission; or
(5) representing the commission.
(c) The electric utility shall pay timely the reasonable costs
of the services of a person retained under Subsection (a), as
determined by the commission. The total costs an electric utility is
required to pay under this subsection may not exceed $1.5 million in
a 12-month period.

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(d) The commission shall allow the electric utility to recover

both the total costs the electric utility paid under Subsection (c)
and the carrying charges for those costs through a rider established
annually to recover the costs paid and carrying charges incurred
during the preceding calendar year. The rider may not be implemented
before the rider is reviewed and approved by the commission.
(e) The commission shall consult the attorney general before
the commission retains a consultant, accountant, auditor, or engineer
under Subsection (a). The retention of an attorney under Subsection
(a) is subject to the approval of the attorney general under Section
402.0212, Government Code.
(f) The commission shall be precluded from engaging any
individual who is required to register under Section 305.003,
Government Code.
(g) This section expires September 1, 2029.

Added by Acts 2015, 84th Leg., R.S., Ch. 849 (S.B. 932), Sec. 1, eff.
September 1, 2015.
Amended by:
Acts 2023, 88th Leg., R.S., Ch. 410 (H.B. 1500), Sec. 29, eff.
September 1, 2023.

Sec. 39.409. RECOUPMENT OF TRANSITION TO COMPETITION COSTS. An

electric utility subject to this subchapter is entitled to recover,
as provided by this section, all reasonable and necessary
expenditures made or incurred before September 1, 2001, to comply
with the provisions of this chapter. Not later than December 1,
2001, each electric utility subject to this subchapter may file with
the commission an application for recovery detailing the amounts
spent or incurred. After notice and hearing, the commission shall
review the amounts and, if found to be reasonable and necessary,
approve a transition to competition retail rate rider mechanism for
the recovery of the approved transition to competition costs. A rate
rider implemented to recover approved transition to competition costs
shall expire not later than December 31, 2006.

Added by Acts 2001, 77th Leg., ch. 1041, Sec. 2, eff. June 15, 2001.

Sec. 39.410. CONTRACTUAL OBLIGATIONS. This subchapter may not:

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(1) interfere with or abrogate the rights or obligations of

any party, including a retail or wholesale customer, to a contract
with an investor-owned electric utility, river authority, municipally
owned utility, or electric cooperative;
(2) interfere with or abrogate the rights or obligations of
a party under a contract or agreement concerning certificated utility
service areas; or
(3) result in a change in wholesale power costs to
wholesale customers in Texas purchasing electricity under wholesale
power contracts the pricing provisions of which are based on
formulary rates, fuel adjustments, or average system costs.

Added by Acts 2001, 77th Leg., ch. 1041, Sec. 2, eff. June 15, 2001.

SUBCHAPTER [Link] TO COMPETITION IN CERTAIN

NON-ERCOT AREAS
Sec. 39.451. APPLICABILITY. This subchapter applies only to an
investor-owned electric utility that is operating solely outside of
ERCOT in areas of this state that were included in the Southeastern
Electric Reliability Council on January 1, 2005.

Added by Acts 2005, 79th Leg., Ch. 1072 (H.B. 1567), Sec. 1, eff. June
18, 2005.

Sec. 39.452. REGULATION OF UTILITY AND TRANSITION TO

COMPETITION. (a) Until the date on which an electric utility
subject to this subchapter is authorized by the commission to
implement customer choice under Section 39.453, the rates of the
electric utility shall be regulated under traditional cost-of-service
regulation and the electric utility is subject to all applicable
regulatory authority prescribed by this subtitle and Subtitle A,
including Chapters 14, 32, 33, 36, and 37.
(b) An electric utility subject to this subchapter shall
propose a competitive generation tariff to allow eligible customers
the ability to contract for competitive generation. The commission
shall approve, reject, or modify the proposed tariff not later than
September 1, 2010. The tariffs subject to this subsection may not be
considered to offer a discounted rate or rates under Section 36.007,
and the utility's rates shall be set, in the proceeding in which the

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tariff is adopted, to recover any costs unrecovered as a result of

the implementation of the tariff. The commission shall ensure that a
competitive generation tariff shall not be implemented in a manner
that harms the sustainability or competitiveness of manufacturers
that choose not to take advantage of competitive generation.
Pursuant to the competitive generation tariff, an electric utility
subject to this subsection shall purchase competitive generation
service, selected by the customer, and provide the generation at
retail to the customer. An electric utility subject to this
subsection shall provide and price retail transmission service,
including necessary ancillary services, to retail customers who
choose to take advantage of the competitive generation tariff at a
rate that is unbundled from the utility's cost of service. Such
customers shall not be considered wholesale transmission customers.
Notwithstanding any other provision of this chapter, the commission
may not issue a decision relating to a competitive generation tariff
that is contrary to an applicable decision, rule, or policy statement
of a federal regulatory agency having jurisdiction.
(c) That portion of any commission order issued before the
effective date of this section requiring the electric utility to
comply with a provision of this chapter is void.
(d) Until the date on which an electric utility subject to this
subchapter implements customer choice:
(1) the provisions of this chapter do not apply to that
electric utility, other than this subchapter, Sections 39.1516 and
39.905, the provisions relating to the duty to obtain a permit from
the Texas Commission on Environmental Quality for an electric
generating facility and to reduce emissions from an electric
generating facility, and the provisions of Subchapter G that pertain
to the recovery and securitization of hurricane reconstruction costs
authorized by Sections 39.458-39.463; and
(2) the electric utility is not subject to a rate freeze
and, subject to the limitation provided by Subsection (b), may file
for rate changes under Chapter 36 and for approval of one or more of
the rate rider mechanisms authorized by Sections 39.454 and 39.455.
(e) An electric utility subject to this subchapter may proceed
with and complete jurisdictional separation to establish two
vertically integrated utilities, one of which is solely subject to
the retail jurisdiction of the commission and one of which is solely
subject to the retail jurisdiction of the Louisiana Public Service

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Commission.
(f) Not later than January 1, 2006, an electric utility subject
to this subchapter shall file a plan with the commission for
identifying the applicable power region or power regions, enumerating
the steps to achieve the certification of a power region in
accordance with Section 39.453, and specifying the schedule for
achieving the certification of a power region. The utility may amend
the plan as appropriate. The commission may, on its own motion or the
motion of any affected person, initiate a proceeding to certify a
qualified power region under Section 39.152 when the conditions
supporting such a proceeding exist.
(g) Not later than the earlier of January 1, 2007, or the 90th
day after the date the applicable power region is certified in
accordance with Section 39.453, the electric utility shall file a
transition to competition plan. The transition to competition plan
must:
(1) identify how the electric utility intends to mitigate
market power and to achieve full customer choice, including specific
alternatives for constructing additional transmission facilities,
auctioning rights to generation capacity, divesting generation
capacity, or any other measure that is consistent with the public
interest;
(2) include a provision to reinstate a customer choice
pilot project and to establish a price to beat for residential
customers and commercial customers having a peak load of 1,000
kilowatts or less; and
(3) include any other additional information or provisions
that the commission may require.
(h) The commission shall approve, modify, or reject a plan
filed under Subsection (g) not later than the 180th day after the
date the plan is filed unless a hearing is requested by any party to
the proceeding. A modification to the plan by the commission may not
be in conflict with the jurisdiction or orders of the Federal Energy
Regulatory Commission or result in significant additional cost
without allowing for timely recovery for that cost. If a hearing is
requested, the 180-day deadline is extended one day for each day of
the hearing. The transition to competition plan shall be updated or
amended annually, subject to commission approval, until the
initiation of customer choice by an electric utility subject to this
subchapter. Consistent with its jurisdiction, the commission shall

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have the authority in approving or modifying the transition to

competition plan to require the electric utility to take reasonable
steps to facilitate the development of a wholesale generation market
within the boundaries of the electric utility's service territory.
(i) Notwithstanding any other provision of this chapter, if the
commission has not approved the transition to competition plan under
this section before January 1, 2009, an electric utility subject to
this subchapter shall cease all activities relating to the transition
to competition under this section. The commission may, on its own
motion or the motion of any affected person, initiate a proceeding
under Section 39.152 to certify a power region to which the utility
belongs as a qualified power region when the conditions supporting
such a proceeding exist. The commission may not approve a plan under
Subsection (g) until the expiration of four years from the time that
the commission certifies a power region under Subsection (f). If
after the expiration of four years from the time the commission
certifies a power region under Subsection (f), and after notice and a
hearing, the commission determines consistent with the study required
by Section 5, S.B. No. 1492, Acts of the 81st Legislature, Regular
Session, 2009, that the electric utility cannot comply with Section
38.073, it shall consider approving a plan under Subsection (g).
(j) Notwithstanding any other provision of this subtitle, in
awarding a certificate of convenience and necessity or allowing cost
recovery for purchased power by an electric utility subject to this
section, the commission shall ensure in its determination that the
provisions of Sections 37.056(c)(4)(D) and (E) are met and that the
generating facility or the purchased power agreement satisfies the
identified reliability needs of the utility.
(k) Notwithstanding Subsection (d), an electric utility subject
to this subchapter that elects to deploy advanced metering and meter
information networks may recover reasonable and necessary costs
incurred in deploying advanced metering and meter information
networks. An electric utility that elects to deploy advanced
metering or meter information networks is subject to commission rules
adopted under Sections 39.107(h) and (k). The commission shall
ensure that any deployment plan approved under this section and any
related customer surcharge:
(1) are not applicable to customer accounts that receive
service at transmission voltage; and
(2) are consistent with commission rules related to

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advanced metering systems regarding:

(A) customer protections;
(B) data security, privacy, and ownership; and
(C) options given consumers to continue to receive
service through a non-advanced meter.
(l) An electric utility subject to this subchapter that elects
to deploy an advanced meter information network shall deploy the
network as rapidly as practicable to allow customers to better manage
energy use and control costs.

Added by Acts 2005, 79th Leg., Ch. 1072 (H.B. 1567), Sec. 1, eff. June
18, 2005.
Amended by:
Acts 2006, 79th Leg., 3rd C.S., Ch. 11 (H.B. 163), Sec. 1, eff.
May 31, 2006.
Acts 2009, 81st Leg., R.S., Ch. 1226 (S.B. 1492), Sec. 3, eff.
June 19, 2009.
Acts 2017, 85th Leg., R.S., Ch. 31 (S.B. 1145), Sec. 1, eff. May
18, 2017.
Acts 2019, 86th Leg., R.S., Ch. 610 (S.B. 936), Sec. 5, eff.
September 1, 2019.
Acts 2023, 88th Leg., R.S., Ch. 410 (H.B. 1500), Sec. 30, eff.
September 1, 2023.

For expiration of this section, see Subsection (g).

Sec. 39.4525. HIRING ASSISTANCE FOR FEDERAL PROCEEDINGS. (a)
The commission may retain any consultant, accountant, auditor,
engineer, or attorney the commission considers necessary to represent
the commission in a proceeding before the Federal Energy Regulatory
Commission, or before a court reviewing proceedings of that federal
commission, related to:
(1) the relationship of an electric utility subject to this
subchapter to a power region, regional transmission organization, or
independent system operator;
(2) the approval of an agreement among the electric utility
and the electric utility's affiliates concerning the coordination of
the operations of the electric utility and the electric utility's
affiliates; or
(3) other matters related to the electric utility subject

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to this subchapter that may affect the ultimate rates paid by retail
customers in this state.
(b) Assistance for which a consultant, accountant, auditor,
engineer, or attorney may be retained under Subsection (a) may
include:
(1) conducting a study;
(2) conducting an investigation;
(3) presenting evidence;
(4) advising the commission; or
(5) representing the commission.
(c) The electric utility shall pay timely the reasonable costs
of the services of a person retained under Subsection (a), as
determined by the commission. The total costs an electric utility is
required to pay under this subsection may not exceed $1.5 million in
a 12-month period.
(d) The commission shall allow the electric utility to recover
both the total costs the electric utility paid under Subsection (c)
and the carrying charges for those costs through a rider established
annually to recover the costs paid and carrying charges incurred
during the preceding calendar year. The rider may not be implemented
before the rider is reviewed and approved by the commission.
(e) The commission shall consult the attorney general before
the commission retains a consultant, accountant, auditor, or engineer
under Subsection (a). The retention of an attorney under Subsection
(a) is subject to the approval of the attorney general under Section
402.0212, Government Code.
(f) The commission shall be precluded from engaging any
individual who is required to register under Section 305.003,
Government Code.
(g) This section expires September 1, 2029.

Added by Acts 2011, 82nd Leg., R.S., Ch. 100 (S.B. 1153), Sec. 1, eff.
May 20, 2011.
Amended by:
Acts 2015, 84th Leg., R.S., Ch. 849 (S.B. 932), Sec. 2, eff.
September 1, 2015.
Acts 2023, 88th Leg., R.S., Ch. 410 (H.B. 1500), Sec. 31, eff.
September 1, 2023.

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Sec. 39.453. CUSTOMER CHOICE AND RELEVANT MARKET AND RELATED

MATTERS. (a) The commission may not authorize customer choice until
the commission certifies the applicable power region as a qualifying
power region under Section 39.152(a). Sections 39.152(b)-(d) also
apply to the electric utility and commission in determining whether
to certify the applicable power region.
(b) The commission shall certify that the requirement of
Section 39.152(a)(3) is met for an electric utility subject to this
subchapter only if the commission finds that the total capacity owned
and controlled by the electric utility and the utility's affiliates
does not exceed 20 percent of the total installed generation capacity
within the power region of that utility.

Added by Acts 2005, 79th Leg., Ch. 1072 (H.B. 1567), Sec. 1, eff. June
18, 2005.

Sec. 39.454. RECOUPMENT OF TRANSITION TO COMPETITION COSTS. An

electric utility subject to this subchapter is entitled to recover,
as provided by this section, all reasonable and necessary
expenditures made or incurred before the effective date of this
section to comply with this chapter, to the extent the costs have not
otherwise been recovered. The electric utility may file with the
commission an application for recovery that gives details of the
amounts spent or incurred. After notice and hearing, the commission
shall review the amounts and, if the amounts are found to be
reasonable and necessary and not otherwise previously recovered,
approve a transition to competition retail rate rider mechanism for
the recovery of the approved transition to competition costs. A rate
proceeding under Chapter 36 is not required to implement the rider.
A rate rider implemented to recover approved transition to
competition costs shall provide for recovery of those costs over a
period not to exceed 15 years, with appropriate carrying costs.

Added by Acts 2005, 79th Leg., Ch. 1072 (H.B. 1567), Sec. 1, eff. June
18, 2005.

Sec. 39.455. RECOVERY OF INCREMENTAL CAPACITY COSTS. An

electric utility subject to this subchapter is entitled to recover,
through a rate rider mechanism, reasonable and necessary costs of

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incremental resources required to meet load requirements to the

extent those costs result in the utility expending more for capacity
costs under purchase power agreements than were included in the
utility's last base rate case, adjusted for load growth. Any rider
under this section shall be implemented after review and approval by
the commission, after notice and opportunity for hearing. Following
the initial implementation of the rider, an electric utility subject
to this subchapter may request revisions semiannually, after notice
and opportunity for hearing, on the dates provided in the
commission's rules for filing petitions to revise the utility's fuel
factor. In conjunction with the utility's fuel reconciliation
proceedings, the commission shall reconcile the costs recovered under
the rider and the actual incremental capacity costs eligible for
recovery under this section. The rider shall expire on the
introduction of customer choice or on the implementation of rates
resulting from the filing of a Subchapter C, Chapter 36, rate
proceeding. In no event may the amount recovered annually under the
rider exceed five percent of the utility's annual base rate revenues.

Added by Acts 2005, 79th Leg., Ch. 1072 (H.B. 1567), Sec. 1, eff. June
18, 2005.

Sec. 39.456. FRANCHISE AGREEMENTS. A municipality, with the

agreement of an electric utility, may accelerate the expiration date
of a franchise agreement that was in existence on September 1, 1999.
Any new franchise agreement must be approved by the governing body of
the municipality. To the extent that a new franchise agreement would
result in an increase in the payment of franchise fees to the
municipality, and subject to the terms of the franchise agreement,
either the electric utility or the municipality, without the need for
a rate proceeding under Chapter 36, may file with the commission for
approval of a rider for the electric utility's recovery of franchise
payments resulting from the agreement, so long as such rider is
collected only from customers of the electric utility that are
located within the boundaries of the municipality.

Added by Acts 2005, 79th Leg., Ch. 1072 (H.B. 1567), Sec. 1, eff. June
18, 2005.

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Sec. 39.457. CONTRACTUAL RIGHTS. In the event that the

electric utility subject to this subchapter either merges,
consolidates, or otherwise becomes affiliated with another owner of
electric generation, or completes the jurisdictional separation
authorized by Section 39.452(e) and the resulting vertically
integrated utility proposes to join a regional transmission
organization, and either action adversely affects the rights or
obligations of an electric cooperative under a wholesale generation
or transmission agreement entered into before the effective date of
this subchapter or otherwise adversely affects the electric
cooperative's access to its existing generation resources under said
agreements, then the utility shall submit a proposal agreeable to the
cooperative and the utility for addressing such rights and
obligations in the appropriate regulatory proceeding. Such proposal
shall be consistent with applicable law regarding the rights and
obligations of the electric cooperative and the utility under such
existing generation or transmission agreements.

Added by Acts 2005, 79th Leg., Ch. 1072 (H.B. 1567), Sec. 1, eff. June
18, 2005.

Sec. 39.458. RECOVERY AND SECURITIZATION OF HURRICANE

RECONSTRUCTION COSTS; PURPOSE. (a) The purpose of this section and
of Sections 39.459-39.463 is to enable an electric utility subject to
this subchapter to obtain timely recovery of hurricane reconstruction
costs and to use securitization financing to recover these costs,
because that type of debt will lower the carrying costs associated
with the recovery of hurricane reconstruction costs relative to the
costs that would be incurred using conventional financing methods.
The proceeds of the transition bonds may be used only for the
purposes of reducing the amount of recoverable hurricane
reconstruction costs, as determined by the commission in accordance
with this subchapter, through the refinancing or retirement of
utility debt or equity.
(b) It is the intent of the legislature that:
(1) securitization of hurricane reconstruction costs will
be subject to the same procedures, standards, and protections for the
securitization of stranded costs and regulatory assets under
Subchapter G in effect on the effective date of this section, except

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as provided by this subchapter; and

(2) the commission will ensure that securitization of
hurricane reconstruction costs provides greater tangible and
quantifiable benefits to ratepayers than would have been achieved
without the issuance of transition bonds.

Added by Acts 2006, 79th Leg., 3rd C.S., Ch. 11 (H.B. 163), Sec. 2,
eff. May 31, 2006.

Sec. 39.459. HURRICANE RECONSTRUCTION COSTS. (a) In this

subchapter:
(1) "Hurricane reconstruction costs" means reasonable and
necessary costs, including costs expensed, charged to the storm
reserve, or capitalized, that are incurred by an electric utility
subject to this subchapter due to any activity or activities
conducted by or on behalf of the electric utility in connection with
the restoration of service associated with electric power outages
affecting customers of the electric utility as the result of
Hurricane Rita, including mobilization, staging, and construction,
reconstruction, replacement, or repair of electric generation,
transmission, distribution, or general plant facilities.
(2) "Hurricane Rita" means the hurricane of that name that
struck the coastal region of this state in September 2005.
(b) If the commission determines it to be appropriate,
hurricane reconstruction costs may include carrying costs from the
date on which the hurricane reconstruction costs were incurred until
the date that transition bonds are issued.
(c) To the extent a utility subject to this subchapter receives
insurance proceeds, governmental grants, or any other source of
funding that compensates it for hurricane reconstruction costs, those
amounts shall be used to reduce the utility's hurricane
reconstruction costs recoverable from customers. If the timing of a
utility's receipt of those amounts prevents their inclusion as a
reduction to the hurricane reconstruction costs that are securitized,
the commission shall take those amounts into account in:
(1) the utility's next base rate proceeding; or
(2) any proceeding in which the commission considers
hurricane reconstruction costs.

Added by Acts 2006, 79th Leg., 3rd C.S., Ch. 11 (H.B. 163), Sec. 2,

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eff. May 31, 2006.

Sec. 39.460. STANDARDS AND PROCEDURES GOVERNING SECURITIZATION

OF HURRICANE RECONSTRUCTION COSTS. (a) The procedures and standards
of this subchapter and the provisions of Subchapter G govern the
application for, and the commission's issuance of, a financing order
to provide for the securitization of hurricane reconstruction costs
by an electric utility subject to this subchapter.
(b) Subject to the standards, procedures, and tests contained
in this subchapter and Subchapter G, the commission shall adopt a
financing order on the application of the utility to recover its
hurricane reconstruction costs. On the commission's issuance of a
financing order allowing for recovery and securitization of hurricane
reconstruction costs, the provisions of this subchapter and
Subchapter G continue to govern the financing order and the rights
and interests established in the order, and this subchapter and
Subchapter G continue to govern any transition bonds issued pursuant
to the financing order. To the extent any conflict exists between
the provisions of this subchapter and Subchapter G in cases involving
the securitization of hurricane reconstruction costs, the provisions
of this subchapter control.
(c) For purposes of this subchapter, "financing order," as
defined by Section 39.302 and as used in Subchapter G, includes a
financing order authorizing the securitization of hurricane
reconstruction costs.
(d) For purposes of this subchapter, "qualified costs," as
defined by Section 39.302 and as used in Subchapter G, includes 100
percent of the electric utility's hurricane reconstruction costs
together with the costs of issuing, supporting, and servicing
transition bonds and any costs of retiring and refunding existing
debt and equity securities of an electric utility subject to this
subchapter in connection with the issuance of transition bonds. For
purposes of this subchapter, the term also includes the costs to the
commission of acquiring professional services for the purpose of
evaluating proposed transactions under this subchapter.
(e) For purposes of this subchapter, "transition bonds," as
defined by Section 39.302 and as used in Subchapter G, includes
transition bonds issued in association with the recovery of hurricane
reconstruction costs. Transition bonds issued to securitize

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hurricane reconstruction costs may be called "hurricane

reconstruction bonds" or may be called by any other name acceptable
to the issuer and the underwriters of the transition bonds.
(f) For purposes of this subchapter, "transition charges," as
defined by Section 39.302 and as used in Subchapter G, includes
nonbypassable amounts to be charged for the use of electric services,
approved by the commission under a financing order to recover
hurricane reconstruction costs, that shall be collected by an
electric utility subject to this subchapter, its successors, an
assignee, or other collection agents as provided for in the financing
order.
(g) Notwithstanding Section 39.303(c), hurricane reconstruction
costs shall be functionalized and allocated to customers in the same
manner as the corresponding facilities and related expenses are
functionalized and allocated in the utility's current base rates.
(h) The amount of any accumulated deferred federal income taxes
offset, used to determine the securitization total, may not be
considered in future rate proceedings. Any tax obligation of the
electric utility arising from its receipt of securitization bond
proceeds, or from the collection and remittance of transition
charges, shall be recovered by the electric utility through the
commission's implementation of Section 39.458, Section 39.459, this
section, and Sections 39.461-39.463.
(i) If the commission determines that recovery of all or any
portion of an electric utility's hurricane reconstruction costs using
securitization is not beneficial to ratepayers of the electric
utility, under one or more of the tests applied to determine those
benefits, the commission shall permit the electric utility to recover
the entirety of the hurricane reconstruction costs through an
appropriate customer surcharge mechanism, including appropriate
carrying costs, provided that the electric utility has not
securitized any portion of its hurricane reconstruction costs. A
rate proceeding under Chapter 36 may not be required to determine and
implement this surcharge mechanism. A rider adopted under this
subsection must expire on the implementation of rates resulting from
the filing of a Subchapter C, Chapter 36, rate proceeding.

Added by Acts 2006, 79th Leg., 3rd C.S., Ch. 11 (H.B. 163), Sec. 2,
eff. May 31, 2006.

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Sec. 39.461. NONBYPASSABLE CHARGES. The commission may include

terms in the financing order to ensure that the imposition and
collection of transition charges associated with the recovery of
hurricane reconstruction costs are nonbypassable by imposing
restrictions on bypassability of the type provided for in this
chapter or by alternative means of ensuring nonbypassability, as the
commission considers appropriate, consistent with the purposes of
securitization.

Added by Acts 2006, 79th Leg., 3rd C.S., Ch. 11 (H.B. 163), Sec. 2,
eff. May 31, 2006.

Sec. 39.462. DETERMINATION OF HURRICANE RECONSTRUCTION COSTS.

(a) An electric utility subject to this subchapter is entitled to
recover hurricane reconstruction costs consistent with the provisions
of this subchapter and is entitled to seek recovery of amounts not
recovered under this subchapter, including hurricane reconstruction
costs not yet incurred at the time an application is filed under
Subsection (b), in its next base rate proceeding or through any other
proceeding authorized by Subchapter C, Chapter 36.
(b) The commission shall issue an order determining the amount
of hurricane reconstruction costs eligible for recovery and
securitization not later than the 150th day after the date an
electric utility subject to this subchapter files an application
seeking that determination. The 150-day period begins on the date
the electric utility files the application, even if the filing occurs
before the effective date of this section.
(c) On issuance by the commission of an order determining the
amount of eligible hurricane reconstruction costs, an electric
utility subject to this subchapter may file an application for a
financing order, which shall be governed by the procedures in
Subchapter G.
(d) To the extent the commission has made a determination of
the eligible hurricane reconstruction costs of an electric utility
subject to this subchapter before the effective date of this section,
that determination may provide the basis for the utility's
application for a financing order pursuant to this subchapter and
Subchapter G. A previous commission determination does not preclude
the utility from requesting recovery of additional hurricane

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reconstruction costs eligible for recovery under this subchapter, but

not previously authorized by the commission.
(e) A rate proceeding under Chapter 36 is not required to
determine the amount of recoverable hurricane reconstruction costs as
provided by this section.

Added by Acts 2006, 79th Leg., 3rd C.S., Ch. 11 (H.B. 163), Sec. 2,
eff. May 31, 2006.

Sec. 39.463. SEVERABILITY. Effective on the date the first

utility transition bonds associated with hurricane reconstruction
costs are issued under this subchapter, if any provision in this
title or portion of this title is held to be invalid or is
invalidated, superseded, replaced, repealed, or expires for any
reason, that occurrence does not affect the validity or continuation
of this subchapter, Subchapter G as it applies to an electric utility
subject to this subchapter, or any part of those provisions, or any
other provision of this title that is relevant to the issuance,
administration, payment, retirement, or refunding of transition bonds
or to any actions of the electric utility, its successors, an
assignee, a collection agent, or a financing party, and those
provisions shall remain in full force and effect.

Added by Acts 2006, 79th Leg., 3rd C.S., Ch. 11 (H.B. 163), Sec. 2,
eff. May 31, 2006.

SUBCHAPTER K.
TRANSITION TO COMPETITION FOR CERTAIN
AREAS OUTSIDE OF ERCOT
Sec. 39.501. APPLICABILITY. (a) This subchapter applies to an
investor-owned electric utility:
(1) that is operating solely outside of ERCOT in areas of
this state that were included in the Southwest Power Pool on January
1, 2008;
(2) that was not affiliated with the Southeastern Electric
Reliability Council on January 1, 2008; and
(3) to which Subchapter I does not apply.
(b) The legislature finds that an electric utility subject to
this subchapter is unable at this time to offer fair competition and
reliable service to all retail customer classes in the area served by

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the utility. As a result, the introduction of retail competition for

such an electric utility is delayed until fair competition and
reliable service are available to all retail customer classes as
determined under this subchapter.

Added by Acts 2009, 81st Leg., R.S., Ch. 128 (S.B. 547), Sec. 1, eff.
September 1, 2009.

Sec. 39.502. COST-OF-SERVICE REGULATION. (a) Until the date

on which an electric utility subject to this subchapter is authorized
by the commission under Section 39.503(f) to implement retail
customer choice, the rates of the utility are subject to regulation
under Chapter 36.
(b) Until the date on which an electric utility subject to this
subchapter implements customer choice, the provisions of this
chapter, other than this subchapter and Sections 39.1516 and 39.905,
do not apply to that utility.

Added by Acts 2009, 81st Leg., R.S., Ch. 128 (S.B. 547), Sec. 1, eff.
September 1, 2009.
Amended by:
Acts 2019, 86th Leg., R.S., Ch. 610 (S.B. 936), Sec. 6, eff.
September 1, 2019.
Acts 2023, 88th Leg., R.S., Ch. 410 (H.B. 1500), Sec. 32, eff.
September 1, 2023.

Sec. 39.5021. METERING. (a) Notwithstanding Section 39.502, an

electric utility subject to this subchapter that elects to deploy
advanced metering and meter information networks may recover
reasonable and necessary costs incurred in deploying advanced
metering and meter information networks. An electric utility that
elects to deploy advanced metering or meter information networks is
subject to commission rules adopted under Sections 39.107(h) and (k).
The commission shall ensure that any deployment plan approved under
this section and any related customer surcharge:
(1) are not applicable to customer accounts that receive
service at transmission voltage; and
(2) are consistent with commission rules related to
advanced metering systems regarding:

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(A) customer protections;

(B) data security, privacy, and ownership; and
(C) options given consumers to continue to receive
service through a non-advanced meter.
(b) An electric utility subject to this subchapter that elects
to deploy an advanced meter information network shall deploy the
network as rapidly as practicable to allow customers to better manage
energy use and control costs.

Added by Acts 2019, 86th Leg., R.S., Ch. 33 (H.B. 1595), Sec. 1, eff.
May 14, 2019.

Sec. 39.503. TRANSITION TO COMPETITION. (a) The events

prescribed by Subsections (b)-(f) shall be followed to introduce
retail competition in the service area of an electric utility subject
to this subchapter. The commission may modify the sequence of events
required by Subsections (b)-(e), but not the substance of the
requirements. Full retail competition may not begin in the service
area of an electric utility subject to this subchapter until all
actions prescribed by those subsections are completed.
(b) The first stage for the transition to competition consists
of the following activities:
(1) approval of a regional transmission organization by the
Federal Energy Regulatory Commission for the power region that
includes the electric utility's service area and commencement of
independent operation of the transmission network under the approved
regional transmission organization;
(2) development of retail market protocols to facilitate
retail competition; and
(3) completion of an expedited proceeding to develop non-
bypassable delivery rates for the customer choice pilot project to be
implemented under Subsection (c)(1).
(c) The second stage for the transition to competition consists
of the following activities:
(1) initiation of the customer choice pilot project in
accordance with Section 39.104;
(2) development of a balancing energy market, a market for
ancillary services, and a market-based congestion management system
for the wholesale market in the power region in which the regional

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transmission organization operates; and

(3) implementation of a seams agreement with adjacent power
regions to reduce barriers to entry and facilitate competition.
(d) The third stage for the transition to competition consists
of the following activities:
(1) the electric utility filing with the commission:
(A) an application for business separation in
accordance with Section 39.051;
(B) an application for unbundled transmission and
distribution rates in accordance with Section 39.201;
(C) an application for certification of a qualified
power region in accordance with Section 39.152; and
(D) an application for price-to-beat rates in
accordance with Section 39.202;
(2) the commission:
(A) approving a business separation plan for the
utility;
(B) setting unbundled transmission and distribution
rates for the utility;
(C) certifying a qualified power region, which includes
conducting a formal evaluation of wholesale market power in the
region, in accordance with Section 39.152;
(D) setting price-to-beat rates for the utility; and
(E) determining which competitive energy services must
be separated from regulated utility activities in accordance with
Section 39.051; and
(3) completion of the testing of retail and wholesale
systems, including those systems necessary for switching customers to
the retail electric provider of their choice and for settlement of
wholesale market transactions, by the regional transmission
organization, the registration agent, and market participants.
(e) The fourth stage for the transition to competition consists
of the following activities:
(1) commission evaluation of the results of the pilot
project;
(2) initiation by the electric utility of a capacity
auction in accordance with Section 39.153 at a time to be determined
by the commission; and
(3) separation by the utility of competitive energy
services from its regulated utility activities, in accordance with

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the commission order approving the separation of competitive energy

services.
(f) The fifth stage for the transition to competition consists
of the following activities:
(1) evaluation by the commission of whether the electric
utility can offer fair competition and reliable service to all retail
customer classes in the area served by the utility, and:
(A) if the commission concludes that the electric
utility can offer fair competition and reliable service to all retail
customer classes in the area served by the utility, the commission
issuing an order initiating retail competition for the utility; and
(B) if the commission determines that the electric
utility cannot offer fair competition and reliable service to all
retail customer classes in the area served by the utility, the
commission issuing an order further delaying retail competition for
the utility; and
(2) on the issuance of an order from the commission
initiating retail competition for the utility, completion by the
utility of the business separation and unbundling in accordance with
the commission order approving the unbundling.

Added by Acts 2009, 81st Leg., R.S., Ch. 128 (S.B. 547), Sec. 1, eff.
September 1, 2009.

For expiration of this section, see Subsection (g).

Sec. 39.504. HIRING ASSISTANCE FOR FEDERAL PROCEEDINGS. (a)
The commission may retain any consultant, accountant, auditor,
engineer, or attorney the commission considers necessary to represent
the commission in a proceeding before the Federal Energy Regulatory
Commission, or before a court reviewing proceedings of that federal
commission, related to:
(1) the relationship of an electric utility subject to this
subchapter to a power region, regional transmission organization, or
independent system operator;
(2) the approval of an agreement among the electric utility
and the electric utility's affiliates concerning the coordination of
the operations of the electric utility and the electric utility's
affiliates; or
(3) other matters related to the electric utility subject

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to this subchapter that may affect the ultimate rates paid by retail
customers in this state.
(b) Assistance for which a consultant, accountant, auditor,
engineer, or attorney may be retained under Subsection (a) may
include:
(1) conducting a study;
(2) conducting an investigation;
(3) presenting evidence;
(4) advising the commission; or
(5) representing the commission.
(c) The electric utility shall pay timely the reasonable costs
of the services of a person retained under Subsection (a), as
determined by the commission. The total costs an electric utility is
required to pay under this subsection may not exceed $1.5 million in
a 12-month period.
(d) The commission shall allow the electric utility to recover
both the total costs the electric utility paid under Subsection (c)
and the carrying charges for those costs through a rider established
annually to recover the costs paid and carrying charges incurred
during the preceding calendar year. The rider may not be implemented
before the rider is reviewed and approved by the commission.
(e) The commission shall consult the attorney general before
the commission retains a consultant, accountant, auditor, or engineer
under Subsection (a). The retention of an attorney under Subsection
(a) is subject to the approval of the attorney general under Section
402.0212, Government Code.
(f) The commission shall be precluded from engaging any
individual who is required to register under Section 305.003,
Government Code.
(g) This section expires September 1, 2029.

Added by Acts 2015, 84th Leg., R.S., Ch. 849 (S.B. 932), Sec. 3, eff.
September 1, 2015.
Amended by:
Acts 2023, 88th Leg., R.S., Ch. 410 (H.B. 1500), Sec. 33, eff.
September 1, 2023.

SUBCHAPTER L. TRANSITION TO COMPETITION AND OTHER PROVISIONS FOR

CERTAIN AREAS OUTSIDE OF ERCOT

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Sec. 39.551. APPLICABILITY. (a) This subchapter applies only

to an investor-owned electric utility:
(1) that is operating solely outside of ERCOT in areas of
this state that were included in the Western Electricity Coordinating
Council on January 1, 2011;
(2) that was not affiliated with ERCOT on January 1, 2011;
and
(3) to which Subchapters I, J, and K do not apply.
(b) The legislature finds that an electric utility subject to
this subchapter is unable at this time to offer fair competition and
reliable service to all retail customer classes in the area served by
the utility. As a result, the introduction of retail competition for
such an electric utility is delayed until fair competition and
reliable service are available to all retail customer classes as
determined under this subchapter.

Added by Acts 2011, 82nd Leg., R.S., Ch. 1113 (S.B. 1910), Sec. 1,
eff. June 17, 2011.

Sec. 39.552. COST-OF-SERVICE REGULATION. (a) Until the date

on which an electric utility subject to this subchapter is authorized
by the commission under Section 39.553(f) to implement retail
customer choice, the rates of the utility are subject to regulation
under Chapter 36.
(b) Until the date on which an electric utility subject to this
subchapter implements customer choice, the provisions of this
chapter, other than this subchapter and Sections 39.1516 and 39.905,
do not apply to that utility.

Added by Acts 2011, 82nd Leg., R.S., Ch. 1113 (S.B. 1910), Sec. 1,
eff. June 17, 2011.
Amended by:
Acts 2019, 86th Leg., R.S., Ch. 610 (S.B. 936), Sec. 7, eff.
September 1, 2019.
Acts 2023, 88th Leg., R.S., Ch. 410 (H.B. 1500), Sec. 34, eff.
September 1, 2023.

Sec. 39.5521. METERING. (a) Notwithstanding Section 39.552, an

electric utility subject to this subchapter that elects to deploy

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advanced metering and meter information networks may recover

reasonable and necessary costs incurred in deploying advanced
metering and meter information networks. An electric utility that
elects to deploy advanced metering or meter information networks is
subject to commission rules adopted under Sections 39.107(h) and (k).
The commission shall ensure that any deployment plan approved under
this section and any related customer surcharge:
(1) are not applicable to customer accounts that receive
service at transmission voltage; and
(2) are consistent with commission rules related to
advanced metering systems regarding:
(A) customer protections;
(B) data security, privacy, and ownership; and
(C) options given consumers to continue to receive
service through a non-advanced meter.
(b) An electric utility subject to this subchapter that elects
to deploy an advanced meter information network shall deploy the
network as rapidly as practicable to allow customers to better manage
energy use and control costs.

Added by Acts 2019, 86th Leg., R.S., Ch. 168 (H.B. 853), Sec. 1, eff.
May 24, 2019.

Sec. 39.553. TRANSITION TO COMPETITION. (a) The events

prescribed by Subsections (b)-(f) shall be followed to introduce
retail competition in the service area of an electric utility subject
to this subchapter. The commission shall ensure that the listed
items in each stage are completed before the next stage is initiated.
Unless stated otherwise, the commission shall conduct each activity
with the electric utility and other interested parties. The
commission may modify the sequence of events required by Subsections
(b)-(e), but not the substance of the requirements, if the commission
finds good cause to do so. Full retail competition may not begin in
the service area of an electric utility subject to this subchapter
until all actions prescribed by those subsections are completed.
(b) The first stage for the transition to competition consists
of the following activities:
(1) approval of a regional transmission organization by the
Federal Energy Regulatory Commission for the power region that

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includes the electric utility's service area and commencement of

independent operation of the transmission network under the approved
regional transmission organization;
(2) development of retail market protocols to facilitate
retail competition; and
(3) completion of an expedited proceeding to develop
nonbypassable delivery rates for the customer choice pilot project to
be implemented under Subsection (c)(1).
(c) The second stage for the transition to competition consists
of the following activities:
(1) initiation of the customer choice pilot project in
accordance with Section 39.104;
(2) development of a balancing energy market, a market for
ancillary services, and a market-based congestion management system
for the wholesale market in the power region in which the regional
transmission organization operates; and
(3) implementation of a seams agreement with adjacent power
regions to reduce barriers to entry and facilitate competition.
(d) The third stage for the transition to competition consists
of the following activities:
(1) the electric utility filing with the commission:
(A) an application for business separation in
accordance with Section 39.051;
(B) an application for unbundled transmission and
distribution rates in accordance with Section 39.201;
(C) an application for certification of a qualified
power region in accordance with Section 39.152; and
(D) an application for price-to-beat rates in
accordance with Section 39.202;
(2) the commission:
(A) approving a business separation plan for the
utility;
(B) setting unbundled transmission and distribution
rates for the utility;
(C) certifying a qualified power region, which includes
conducting a formal evaluation of wholesale market power in the
region, in accordance with Section 39.152;
(D) setting price-to-beat rates for the utility; and
(E) determining which competitive energy services must
be separated from regulated utility activities in accordance with

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Section 39.051; and

(3) completion of the testing of retail and wholesale
systems, including those systems necessary for switching customers to
the retail electric provider of their choice and for settlement of
wholesale market transactions, by the regional transmission
organization, the registration agent, and market participants.
(e) The fourth stage for the transition to competition consists
of the following activities:
(1) commission evaluation of the results of the pilot
project;
(2) initiation by the electric utility of a capacity
auction in accordance with Section 39.153 at a time to be determined
by the commission; and
(3) separation by the utility of competitive energy
services from its regulated utility activities, in accordance with
the commission order approving the separation of competitive energy
services.
(f) The fifth stage for the transition to competition consists
of the following activities:
(1) evaluation by the commission of whether the electric
utility can offer fair competition and reliable service to all retail
customer classes in the area served by the utility, and:
(A) if the commission concludes that the electric
utility can offer fair competition and reliable service to all retail
customer classes in the area served by the utility, the commission
issuing an order initiating retail competition for the utility; and
(B) if the commission determines that the electric
utility cannot offer fair competition and reliable service to all
retail customer classes in the area served by the utility, the
commission issuing an order further delaying retail competition for
the utility; and
(2) on the issuance of an order from the commission
initiating retail competition for the utility, completion by the
utility of the business separation and unbundling in accordance with
the commission order approving the unbundling.

Added by Acts 2011, 82nd Leg., R.S., Ch. 1113 (S.B. 1910), Sec. 1,
eff. June 17, 2011.

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Sec. 39.554. INTERCONNECTION OF DISTRIBUTED RENEWABLE

GENERATION. (a) In this section:
(1) "Distributed renewable generation" has the meaning
assigned by Section 39.916.
(2) "Distributed renewable generation owner" means an owner
of distributed renewable generation that is a retail electric
customer.
(3) "Interconnection" has the meaning assigned by Section
39.916.
(b) A distributed renewable generation owner in the service
area of an electric utility subject to this subchapter may request
interconnection by filing an application for interconnection with the
utility. An application for interconnection is subject to the
utility's safety and reliability requirements. The utility's
procedures for the submission and processing of an application for
interconnection shall be consistent with rules adopted by the
commission regarding interconnection.
(c) An electric utility that approves an application of a
distributed renewable generation owner under Subsection (b):
(1) shall install, maintain, and retain ownership of the
meter and metering equipment; and
(2) may install load research metering equipment on the
premises of the owner, at no expense to the owner.
(d) At the request of an electric utility that approves an
application of a distributed renewable generation owner under
Subsection (b), the owner shall:
(1) provide and install a meter socket, a metering cabinet,
or both a socket and cabinet at a location designated by the utility
on the premises of the owner; and
(2) provide, at no expense to the utility, a suitable
location for the utility to install meters and equipment associated
with billing and load research.
(e) An electric utility that approves an application of a
distributed renewable generation owner under Subsection (b) shall
provide to the owner the metering options described by Section
39.916(f) and an option to interconnect with the utility through a
single meter that runs forward and backward if:
(1) the owner:
(A) intends to interconnect the distributed renewable
generation at an apartment house, as defined by Section 184.011,

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occupied by low-income elderly tenants that qualifies for master

metering under Section 184.012(b) and the distributed renewable
generation is reasonably expected to generate not less than 50
percent of the apartment house's annual electricity use; or
(B) has a qualifying facility with a design capacity of
not more than 50 kilowatts; and
(2) the distributed renewable generation or qualifying
facility that is the subject of the application is rated to produce
an amount of electricity that is less than or equal to:
(A) the owner's estimated annual kilowatt hour
consumption for a new apartment house or qualifying facility; or
(B) the amount of electricity the owner consumed in the
year before installation of the distributed renewable generation or
qualifying facility.
(f) For a distributed renewable generation owner that chooses
interconnection through a single meter under Subsection (e):
(1) the amount of electricity the owner generates through
distributed renewable generation or a qualifying facility for a given
billing period offsets the owner's consumption for that billing
period; and
(2) any electricity the owner generates through distributed
renewable generation or a qualifying facility that exceeds the
owner's consumption for a given billing period shall be credited to
the owner under Subsection (g).
(g) An electric utility that purchases surplus electricity
under Subsection (f)(2) shall purchase the electricity from the
distributed renewable generation owner at the cost of the utility as
determined by commission rule. The utility shall take reasonable
steps to inform the owner of the amount of surplus electricity
purchased from the owner in kilowatt hours during the owner's most
recent billing cycle. A credit balance of not more than $50 on the
owner's monthly bill may be carried forward onto the owner's next
monthly bill. The utility shall refund to the owner a credit balance
that is not carried forward or the portion of a credit balance that
exceeds $50 if the credit balance is carried forward.
(h) In a base rate proceeding or fuel cost recovery proceeding
conducted under Chapter 36, the commission shall ensure that any
additional cost associated with the metering and payment options
described by Subsections (e), (f), and (g) is allocated only to
customer classes that include distributed renewable generation owners

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who have chosen those metering options.

Added by Acts 2011, 82nd Leg., R.S., Ch. 1113 (S.B. 1910), Sec. 1,
eff. June 17, 2011.

Sec. 39.555. MARKETING OF ENERGY EFFICIENCY AND RENEWABLE

ENERGY PROGRAMS. An electric utility subject to this subchapter may
market an energy efficiency or renewable energy program directly to a
retail electric customer in its service territory and provide rebate
or incentive funds directly to a customer to promote or facilitate
the success of programs implemented under Section 39.905.

Added by Acts 2011, 82nd Leg., R.S., Ch. 1113 (S.B. 1910), Sec. 1,
eff. June 17, 2011.

SUBCHAPTER M. WINTER STORM URI DEFAULT BALANCE FINANCING

Sec. 39.601. PURPOSE. (a) The purpose of this subchapter is to
address the Winter Storm Uri default balance, as defined by Section
39.602, in a manner that benefits the public interest by:
(1) enabling the independent organization to finance the
payment of the default balance with debt obligations; and
(2) authorizing the commission to contract with the
comptroller under Section 404.0241, Government Code, to finance the
payment of the default balance with debt obligations.
(b) Financing the default balance in the manner provided by
this subchapter will:
(1) allow wholesale market participants that are owed money
to be paid in a more timely manner;
(2) replenish financial revenue auction receipts
temporarily used by the independent organization to reduce the Winter
Storm Uri-related amounts short-paid to the wholesale market
participants; and
(3) allow the wholesale market to repay the default balance
over time.
(c) The legislature finds that the financing authorized by this
subchapter serves the public purpose of preserving the integrity of
the electricity market in the ERCOT power region.
(d) The proceeds of debt obligations issued under this
subchapter must be used solely for the purpose of financing default

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balances that otherwise would be or have been uplifted to the

wholesale market.
(e) The commission shall ensure that the structuring and
pricing of debt obligations issued under this subchapter result in
the lowest financing costs consistent with market conditions and the
terms of the commission's order. The present value calculation must
use a discount rate equal to the proposed interest rate on the debt
obligations.

Added by Acts 2021, 87th Leg., R.S., Ch. 908 (H.B. 4492), Sec. 5, eff.
June 16, 2021.

Sec. 39.602. DEFINITIONS. In this subchapter:

(1) "Default balance" means an amount of money of not more
than $800 million that includes only:
(A) amounts owed to the independent organization by
competitive wholesale market participants from the period of
emergency that otherwise would be or have been uplifted to other
wholesale market participants;
(B) financial revenue auction receipts used by the
independent organization to temporarily reduce amounts short-paid to
wholesale market participants related to the period of emergency; and
(C) reasonable costs incurred by a state agency or the
independent organization to implement a debt obligation order under
Sections 39.603 and 39.604, including the cost of retiring or
refunding existing debt.
(2) "Default charges" means charges assessed to wholesale
market participants to repay amounts financed under this subchapter
to pay the default balance.
(3) "Independent organization" means the independent
organization certified under Section 39.151 for the ERCOT power
region.
(4) "Period of emergency" means the period beginning 12:01
a.m., February 12, 2021, and ending 11:59 p.m., February 20, 2021.

Added by Acts 2021, 87th Leg., R.S., Ch. 908 (H.B. 4492), Sec. 5, eff.
June 16, 2021.

Sec. 39.603. DEBT OBLIGATION ORDER. (a) On application by the

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independent organization, the commission by order may authorize the

independent organization to establish a debt financing mechanism to
finance the default balance if the commission finds that the debt
obligations are needed to preserve the integrity of the wholesale
market and the public interest, after considering:
(1) the need to timely replenish financial revenue auction
receipts used by the independent organization to reduce amounts
short-paid to wholesale market participants;
(2) the interests of wholesale market participants that are
owed balances; and
(3) the potential effects of uplifting those balances to
the wholesale market without a financing vehicle.
(b) The order must state:
(1) the default balance to be financed; and
(2) the period over which the default charges must be
assessed to repay the debt obligations, which may not exceed 30
years.
(c) The order must include an adjustment mechanism requiring
the independent organization to adjust default charges to refund,
over the remaining period of the default charges, any payments made
by a market participant toward unpaid obligations from the period of
emergency that were included in the financed default balance.
(d) The independent organization shall collect from and
allocate among wholesale market participants the default charges
using the same allocated pro rata share methodology under which the
charges would otherwise be uplifted under the protocols in effect on
March 1, 2021. The default charges must be assessed on all wholesale
market participants, including market participants who are in default
but still participating in the wholesale market and who enter the
market after a debt obligation order is issued under this subchapter,
and may be based on periodically updated transaction data to prevent
market participants from engaging in behavior designed to avoid the
default charges.
(e) Not later than the 30th day after the date the independent
organization receives a default charge payment from a wholesale
market participant, the independent organization shall remit the
payment to the comptroller toward repayment of debt obligations in
which the comptroller made an investment under Section 404.0241(b-1),
Government Code, if applicable.
(f) Notwithstanding another provision of this subchapter,

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default charges may not be collected from or allocated to a market

participant that:
(1) otherwise would be subject to a default charge solely
as a result of acting as a central counterparty clearinghouse in
wholesale market transactions in the ERCOT power region; and
(2) is regulated as a derivatives clearing organization, as
defined by Section 1a, Commodity Exchange Act (7 U.S.C. Section 1a).
(g) Not later than the 90th day after the date the independent
organization files an application for an order under Subsection (a),
the commission shall issue an order described by Subsection (a) or an
order denying the application. The order becomes effective in
accordance with its terms and the order, together with the default
charges authorized in the order, shall be irrevocable and not subject
to reduction, impairment, or adjustment by further action of the
commission after the order takes effect. Notwithstanding this
requirement, the commission may refinance any debt obligations
created by an order issued under this subchapter if the commission
determines that the refinancing is in the public interest,
considering the interest of both the ERCOT market and the state's
interest in the economic stabilization fund, and otherwise meets the
requirements of this subchapter.
(h) An order described by Subsection (a) or (g) is not subject
to rehearing by the commission. The order may be reviewed by appeal
by a party to the proceeding to a Travis County district court that
is filed not later than the 15th day after the date the order is
signed by the commission. The judgment of the district court may be
reviewed only by a direct appeal to the Supreme Court of Texas that
is filed not later than the 15th day after the date of the entry of
judgment. All appeals shall be heard and determined by the district
court and the Supreme Court of Texas as expeditiously as possible
with lawful precedence over other matters. Review on appeal shall be
based solely on the record before the commission and briefs to the
court and shall be limited to whether the order conforms to the
constitution and laws of this state and the United States and is
within the authority of the commission under this chapter.
(i) A debt obligation issued under this section is a
nonrecourse debt secured solely by the default charges explicitly
assessed to repay the obligation. The independent organization's
obligations authorized under this section do not create personal
liability for the independent organization.

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Added by Acts 2021, 87th Leg., R.S., Ch. 908 (H.B. 4492), Sec. 5, eff.
June 16, 2021.

Sec. 39.604. COMMISSION-AUTHORIZED FINANCING. (a) The

commission may contract with another state agency with expertise in
public financing to establish a debt financing mechanism for the
payment of the default balance as defined in this subchapter, under
an order that meets the requirements of Section 39.603. This section
does not apply to a default balance securitized under Subchapter D,
Chapter 41.
(b) The contracted state agency and any issuer, along with the
independent organization, must be a party to the commission's
proceedings that address the issuance of an order.
(c) In addition to the other applicable requirements of this
subtitle, an order issued under this section must:
(1) require the sale, assignment, or other transfer to the
contracted state agency of default charges created by the order and,
following that sale, assignment, or transfer, require that default
charges paid under any order be created, assessed, and collected as
the property of the contracted state agency, subject to subsequent
sale, assignment, or transfer by the contracted state agency as
authorized under this subchapter;
(2) authorize:
(A) the issuance of debt obligations by the contracted
state agency secured by a pledge of default charge revenue, and the
application of the proceeds of those debt obligations, net of
issuance costs, to the independent organization; or
(B) the acquisition of default charge revenue from the
independent organization by the contracted state agency, financed:
(i) by a loan by an issuer to the contracted state
agency of the proceeds of debt obligations, net of issuance costs; or
(ii) by the acquisition by an issuer from the
contracted state agency of the default charge revenue and in each
case the pledge of the revenue to the repayment of the loan or other
debt obligation, as applicable; and
(3) authorize the independent organization to serve as
collection agent to collect the default charges and transfer the
collected default charges to the contracted state agency or the
issuer, as appropriate.

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 UTILITIES CODE

(d) After issuance of the order, the contracted state agency

shall arrange for the issuance of debt obligations, as specified by
the order, by the contracted state agency or another issuer selected
by the contracted state agency and approved by the commission.
(e) Debt obligations issued pursuant to an order issued under
this section are secured only by the default charge revenue and any
other funds pledged under the bond documents. No assets of the state
or the independent organization are subject to claims by the holders
of the debt obligations. Following assignment of the default charge
revenue, the independent organization does not have any beneficial
interest or claim of right in the revenue.
(f) Effective on the date the first debt obligations are issued
under this subchapter, if any provision of this title or portion of
this title is held to be invalid or is invalidated, superseded,
replaced, or repealed, or expires for any reason, that occurrence
does not affect the validity or continuation of this subchapter or
any other provision of this title that is relevant to the issuance,
administration, payment, retirement, or refunding of debt obligations
authorized under this subchapter or to any actions of the independent
organization, its successors, an assignee, a collection agent, the
contracted state agency, or an issuer and those provisions shall
remain in full force and effect.

Added by Acts 2021, 87th Leg., R.S., Ch. 908 (H.B. 4492), Sec. 5, eff.
June 16, 2021.

Sec. 39.605. DEFAULT CHARGES NONBYPASSABLE. An order issued

under Section 39.603 or 39.604 must:
(1) include terms ensuring that the imposition and
collection of default charges authorized in the order shall be
nonbypassable by wholesale market participants; and
(2) authorize the independent organization to establish
appropriate fees and other methods for pursuing amounts owed from
entities exiting the wholesale market.

Added by Acts 2021, 87th Leg., R.S., Ch. 908 (H.B. 4492), Sec. 5, eff.
June 16, 2021.

Sec. 39.606. TRUE-UP MECHANISM. An order issued under Section

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39.603 or 39.604 must include a mechanism requiring that default

charges be reviewed and adjusted at least annually, not later than
the 45th day after the anniversary date of the issuance of the order,
to:
(1) correct over-collections or under-collections over the
preceding 12 months; and
(2) ensure the expected recovery of amounts sufficient to
timely provide all payments of debt service.

Added by Acts 2021, 87th Leg., R.S., Ch. 908 (H.B. 4492), Sec. 5, eff.
June 16, 2021.

Sec. 39.607. TAX EXEMPTION. The transfer and receipt of

default charges are exempt from state and local sales and use,
franchise, and gross receipts taxes.

Added by Acts 2021, 87th Leg., R.S., Ch. 908 (H.B. 4492), Sec. 5, eff.
June 16, 2021.

Sec. 39.608. PROPERTY RIGHTS. (a) The rights and interests of

the independent organization or its successor under a debt obligation
order issued under this subchapter, including the right to impose,
collect, and receive default charges, shall be only contract rights
until they are first transferred to an assignee or pledged in
connection with an investment agreement entered into under Section
404.0241, Government Code, or the issuance of debt obligations, at
which time they will become default property, as described by
Subsection (b).
(b) Default property shall constitute a present property right
for purposes of contracts concerning the sale or pledge of property,
even though the imposition and collection of default charges depends
on further acts of the independent organization or others that have
not yet occurred. A debt obligation order issued under this
subchapter shall remain in effect and the property shall continue to
exist for the same period as the pledge of the state described by
Section 39.609.
(c) All revenues and collections resulting from default charges
shall constitute proceeds only of the default property arising from
the debt obligation order.

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 UTILITIES CODE

Added by Acts 2021, 87th Leg., R.S., Ch. 908 (H.B. 4492), Sec. 5, eff.
June 16, 2021.

Sec. 39.609. PLEDGE OF STATE. Debt obligations issued pursuant

to this subchapter, including any bonds, are not a debt or obligation
of the state and are not a charge on its full faith and credit or
taxing power. The state pledges, however, for the benefit and
protection of financing parties and the independent organization that
it will not take or permit any action that would impair the value of
default property, or reduce, alter, or impair the default charges to
be imposed, collected, and remitted to financing parties, until the
principal, interest and premium, and any other charges incurred and
contracts to be performed in connection with the related debt
obligations have been paid and performed in full. Any party issuing
a debt obligation under this subchapter is authorized to include this
pledge in any documentation relating to the obligation.

Added by Acts 2021, 87th Leg., R.S., Ch. 908 (H.B. 4492), Sec. 5, eff.
June 16, 2021.

SUBCHAPTER N. WINTER STORM URI UPLIFT FINANCING

Sec. 39.651. PURPOSE; USE OF PROCEEDS. (a) The purpose of this
subchapter is to address the Winter Storm Uri uplift balance by:
(1) enabling the independent organization certified under
Section 39.151 for the ERCOT power region to finance the uplift
balance on behalf of wholesale market participants through debt
obligations; and
(2) authorizing the commission to contract with another
state agency to finance the payment of the uplift balance with debt
obligations or use any another financial mechanism consistent with
this subchapter for that purpose.
(b) Financing the uplift balance in the manner provided by this
subchapter will allow wholesale market participants who were assessed
extraordinary uplift charges due to consumption during the period of
emergency to pay those charges over a longer period of time,
alleviating liquidity issues and reducing the risk of additional
defaults in the wholesale market.
(c) The legislature finds that authorizing financing under this

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subchapter serves the public purpose of allowing the commission to

stabilize the wholesale electricity market in the ERCOT power region.
(d) The proceeds of debt obligations issued under this
subchapter must be used solely for the purpose of financing
reliability deployment price adder charges and ancillary service
costs that exceeded the commission's system-wide offer cap and were
uplifted to load-serving entities based on consumption during the
period of emergency. A load-serving entity that receives proceeds
from the debt obligations may use the proceeds solely for the
purposes of fulfilling payment obligations directly related to such
costs and refunding such costs to retail customers who have paid or
otherwise would be obligated to pay such costs.
(e) The commission shall ensure that the structuring and
pricing of the debt obligations results in the lowest uplift charges
consistent with market conditions and the terms of the order issued
under this subchapter. The present value calculation must use a
discount rate equal to the proposed interest rate on the debt
obligations.

Added by Acts 2021, 87th Leg., R.S., Ch. 908 (H.B. 4492), Sec. 5, eff.
June 16, 2021.

Sec. 39.652. DEFINITIONS. In this subchapter:

(1) "Independent organization" means the independent
organization certified under Section 39.151 for the ERCOT power
region.
(2) "Load-serving entity" means a municipally owned
utility, an electric cooperative, or a retail electric provider.
(3) "Period of emergency" means the period beginning 12:01
a.m., February 12, 2021, and ending 11:59 p.m., February 20, 2021.
(4) "Uplift balance" means an amount of money of not more
than $2.1 billion that was uplifted to load-serving entities on a
load ratio share basis due to energy consumption during the period of
emergency for reliability deployment price adder charges and
ancillary services costs in excess of the commission's system-wide
offer cap, excluding amounts securitized under Subchapter D, Chapter
41. The term does not include amounts that were part of the
prevailing settlement point price during the period of emergency.
(5) "Uplift charges" means charges assessed to load-serving

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 UTILITIES CODE

entities to repay amounts financed under this subchapter to pay the

uplift balance and reasonable costs incurred by a state agency or the
independent organization to implement a debt obligation order under
Section 39.653, 39.654, or 39.655, including the cost of retiring or
refunding existing debt.

Added by Acts 2021, 87th Leg., R.S., Ch. 908 (H.B. 4492), Sec. 5, eff.
June 16, 2021.

Sec. 39.653. DEBT OBLIGATION ORDER. (a) The independent

organization shall file an application with the commission to
establish a debt financing mechanism for the payment of the uplift
balance if the commission finds that such financing will support the
financial integrity of the wholesale market and is necessary to
protect the public interest, considering the impacts on both
wholesale market participants and retail customers.
(b) An order issued under this section must:
(1) state the uplift balance to be financed;
(2) state the period over which the uplift charges must be
assessed to repay the debt obligations, which may not exceed 30
years; and
(3) provide the process for remitting the proceeds of the
financing to load-serving entities who were exposed to the costs
included in the uplift balance, including a requirement for the load-
serving entities to submit documentation of their exposure.
(c) The independent organization shall assess uplift charges to
all load-serving entities on a load ratio share basis, which may be
translated to a kWh charge, including load serving entities who enter
the market after an order has been issued under this subchapter, but
excluding the load of entities that opt out under Subsection (d).
(d) The commission shall develop a one-time process that allows
municipally owned utilities, electric cooperatives, river
authorities, a retail electric provider that has the same corporate
parent as each of the provider's customers, a retail electric
provider that is an affiliate of each of the provider's customers,
and transmission-voltage customers served by a retail electric
provider to opt out of the uplift charges by paying in full all
invoices owed for usage during the period of emergency. Load-serving
entities and transmission-voltage customers that opt out under this

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 UTILITIES CODE

subsection shall not receive any proceeds from the uplift financing.
(e) An order issued under this section must include a
requirement that any load-serving entity that receives proceeds from
the financing that exceed the entity's actual exposure to uplift
charges from consumption during the period of emergency notify the
independent organization and remit any excess receipts. Any payments
received under this subsection must be credited against the uplift
balance to reduce the remaining uplift charges.
(f) Not later than the 90th day after the date the independent
organization files an application for an order under Subsection (a),
the commission shall issue an order described by Subsection (a) or an
order denying the application. The order becomes effective in
accordance with its terms and the order, together with the uplift
charges authorized in the order, shall be irrevocable and not subject
to reduction, impairment, or adjustment by further action of the
commission after it takes effect. Notwithstanding this requirement,
the commission may refinance any debt obligations created by an order
under this subchapter if the commission determines that the
refinancing is in the public interest and otherwise meets the
requirements of this subchapter.
(g) An order issued under this section is not subject to
rehearing by the commission. An order may be reviewed by appeal by a
party to the proceeding to a Travis County district court filed not
later than the 15th day after the date the order is signed by the
commission. The judgment of the district court may be reviewed only
by direct appeal to the Supreme Court of Texas filed not later than
the 15th day after the date of the entry of judgment. All appeals
shall be heard and determined by the district court and the Supreme
Court of Texas as expeditiously as possible with lawful precedence
over other matters. Review on appeal shall be based solely on the
record before the commission and briefs to the court and shall be
limited to whether the order conforms to the constitution and laws of
this state and the United States and is within the authority of the
commission under this chapter.
(h) A debt obligation issued under this section is a
nonrecourse debt secured solely by the uplift charges explicitly
assessed to repay the obligation. The independent organization's
obligations authorized under this section do not create personal
liability for the independent organization.
(i) This section does not apply to any balance securitized

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 UTILITIES CODE

under Subchapter D, Chapter 41.

Added by Acts 2021, 87th Leg., R.S., Ch. 908 (H.B. 4492), Sec. 5, eff.
June 16, 2021.

Sec. 39.654. COMMISSION-AUTHORIZED FINANCING. (a) The

commission may contract with another state agency with expertise in
public financing to establish a debt financing mechanism to finance
the payment of the uplift balance under an order that meets the
requirements of Section 39.653.
(b) The contracted state agency and any issuer must be a party
to the commission's proceedings that address the issuance of an order
along with the independent organization.
(c) In addition to the other applicable requirements of this
subtitle, an order issued under this section must:
(1) require the sale, assignment, or other transfer to the
contracted state agency of uplift charges created by the order and,
following that sale, assignment, or transfer, require that uplift
charges paid under any order be created, assessed, and collected as
the property of the contracted state agency, subject to subsequent
sale, assignment, or transfer by the contracted state agency as
authorized under this subchapter;
(2) authorize:
(A) the issuance of debt obligations by the contracted
state agency secured by a pledge of uplift charge revenue, and the
application of the proceeds of those debt obligations, net of
issuance costs, to the independent organization; or
(B) the acquisition of uplift charge revenue from the
independent organization by the contracted state agency, financed:
(i) by a loan by an issuer to the contracted state
agency of the proceeds of debt obligations, net of issuance costs; or
(ii) by the acquisition by an issuer from the
contracted state agency of the uplift charge revenue and in each case
the pledge of the revenue to the repayment of the loan or debt
obligations, as applicable; and
(3) authorize the independent organization to serve as
collection agent to collect the uplift charges and transfer the
collected uplift charges to the contracted state agency or the
issuer, as appropriate.

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 UTILITIES CODE

(d) After issuance of the order, the contracted state agency

shall arrange for the issuance of debt obligations, as specified by
the order, by the contracted state agency or another issuer selected
by the contracted state agency and approved by the commission.
(e) Debt obligations issued pursuant to an order issued under
this section are secured only by the uplift charge revenue and any
other funds pledged under the bond documents. No assets of the state
or the independent organization are subject to claims by the holders
of the debt obligations. Following assignment of the uplift charge
revenue, the independent organization does not have any beneficial
interest or claim of right in the revenue.

Added by Acts 2021, 87th Leg., R.S., Ch. 908 (H.B. 4492), Sec. 5, eff.
June 16, 2021.

Sec. 39.655. OTHER FINANCIAL MECHANISM. The commission may use

a financial mechanism other than the mechanisms described by Sections
39.653 and 39.654 that meets the requirements of this subchapter to
accomplish the purposes of this subchapter.

Added by Acts 2021, 87th Leg., R.S., Ch. 908 (H.B. 4492), Sec. 5, eff.
June 16, 2021.

Sec. 39.656. UPLIFT CHARGES NONBYPASSABLE. An order issued

under Section 39.653, 39.654, or 39.655 must:
(1) include terms ensuring that the imposition and
collection of uplift charges authorized in the order shall be
nonbypassable, except for entities excluded under Section 39.653(d);
and
(2) authorize the independent organization to establish
appropriate fees and other methods for pursuing amounts owed from
entities exiting the wholesale market.

Added by Acts 2021, 87th Leg., R.S., Ch. 908 (H.B. 4492), Sec. 5, eff.
June 16, 2021.

Sec. 39.657. TRUE-UP. An order shall include a mechanism

requiring that uplift charges be reviewed and adjusted at least

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 UTILITIES CODE

annually, not later than the 45th day after the anniversary date of
the issuance of the debt obligations, to:
(1) correct over-collections or under-collections over the
preceding 12 months; and
(2) ensure the expected recovery of amounts sufficient to
timely provide all payments of debt service and other required
amounts and charges in connection with the debt obligations.

Added by Acts 2021, 87th Leg., R.S., Ch. 908 (H.B. 4492), Sec. 5, eff.
June 16, 2021.

Sec. 39.658. TAX EXEMPTION. Transactions involving the

transfer and ownership of uplift property and the receipt of uplift
charges are exempt from state and local income, sales, franchise,
gross receipts, and other taxes or similar charges.

Added by Acts 2021, 87th Leg., R.S., Ch. 908 (H.B. 4492), Sec. 5, eff.
June 16, 2021.

Sec. 39.659. SEVERABILITY. Effective on the date the first

debt obligations are issued under this subchapter, if any provision
in this title or portion of this title is held to be invalid or is
invalidated, superseded, replaced, repealed, or expires for any
reason, that occurrence does not affect the validity or continuation
of this subchapter or any other provision of this title that is
relevant to the issuance, administration, payment, retirement, or
refunding of debt obligations or to any actions of the independent
organization, its successors, an assignee, a collection agent, or a
financing party, which shall remain in full force and effect.

Added by Acts 2021, 87th Leg., R.S., Ch. 908 (H.B. 4492), Sec. 5, eff.
June 16, 2021.

Sec. 39.660. CUSTOMER CHARGES. All load-serving entities that

receive offsets to specific uplift charges from the independent
organization under this subchapter must adjust customer invoices to
reflect the offsets for any charges that were or would otherwise be
passed through to customers under the terms of service with the load-

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 UTILITIES CODE

serving entity, including by providing a refund for any offset

charges that were previously paid. An electric cooperative,
including an electric cooperative that elects to receive offsets,
shall not otherwise become subject to rate regulation by the
commission and receipt of offsets does not affect the applicability
of Chapter 41 to an electric cooperative.

Added by Acts 2021, 87th Leg., R.S., Ch. 908 (H.B. 4492), Sec. 5, eff.
June 16, 2021.

Sec. 39.661. ENFORCEMENT. The commission may use any

enforcement mechanism established by Chapter 15 or this chapter,
including revocation of certification by the commission, against any
entity that fails to remit excess receipts from the uplift balance
financing under Section 39.653(e) or otherwise misappropriates or
misuses amounts received from the uplift balance financing this
subchapter.

Added by Acts 2021, 87th Leg., R.S., Ch. 908 (H.B. 4492), Sec. 5, eff.
June 16, 2021.

Sec. 39.662. PROPERTY RIGHTS. (a) The rights and interests of

the independent organization or its successor under a debt obligation
order issued under this subchapter, including the right to impose,
collect, and receive uplift charges authorized in a debt obligation
order under this subchapter, shall be only contract rights until they
are first transferred to an assignee or pledged in connection with
the issuance of a financing agreement entered into under Section
39.654(a) or the issuance of debt obligations, at which time they
will become uplift property, as described by Subsection (b).
(b) Uplift property shall constitute a present property right
for purposes of contracts concerning the sale or pledge of property,
even though the imposition and collection of uplift charges depends
on further acts of the independent organization or others that have
not yet occurred. A debt obligation order issued under this
subchapter shall remain in effect and the property shall continue to
exist for the same period as the pledge of the state described by
Section 39.663.
(c) All revenues and collections resulting from uplift charges

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 UTILITIES CODE

shall constitute proceeds only of the uplift property arising from

the debt obligation order.

Added by Acts 2021, 87th Leg., R.S., Ch. 908 (H.B. 4492), Sec. 5, eff.
June 16, 2021.

Sec. 39.663. PLEDGE OF STATE. Debt obligations issued pursuant

to this subchapter, including any bonds, are not a debt or obligation
of the state and are not a charge on its full faith and credit or
taxing power. The state pledges, however, for the benefit and
protection of financing parties and the independent organization that
it will not take or permit any action that would impair the value of
uplift property, or reduce, alter, or impair the uplift charges to be
imposed, collected, and remitted to financing parties, until the
principal, interest and premium, and any other charges incurred and
contracts to be performed in connection with the related debt
obligations have been paid and performed in full. Any party issuing
a debt obligation under this subchapter is authorized to include this
pledge in any documentation relating to the obligation.

Added by Acts 2021, 87th Leg., R.S., Ch. 908 (H.B. 4492), Sec. 5, eff.
June 16, 2021.

Sec. 39.664. LEGAL ACTIONS INVOLVING PRICING OR UPLIFT ACTIONS.

A load-serving entity that receives proceeds from the financing under
this subchapter shall return an amount of the proceeds equal to any
amount of money received by the entity due to litigation seeking
judicial review of pricing or uplift actions taken by the commission
or the independent organization in connection with the period of
emergency.

Added by Acts 2021, 87th Leg., R.S., Ch. 908 (H.B. 4492), Sec. 5, eff.
June 16, 2021.

SUBCHAPTER Z. MISCELLANEOUS PROVISIONS

Sec. 39.9016. NUCLEAR SAFETY FEE. An electric utility that
operates a nuclear asset located in a county on the coast of the Gulf
of Mexico shall pay a nuclear safety fee for the year 2000 and the

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 UTILITIES CODE

year 2001 to each taxing unit in which the nuclear asset is located,
other than a school district, in an amount equal to the difference
between the ad valorem taxes imposed by the taxing unit in 1999 and
the amount of ad valorem taxes imposed by the unit in the year for
which the fee is due, except that the amount of the fee may not
exceed one-half the taxes imposed on the asset by the unit in 1999.
The nuclear safety fee shall be considered a tax or fee under Section
39.258(5).

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 39.902. CUSTOMER EDUCATION. (a) On or before January 1,

2001, the commission shall develop and implement an educational
program to inform customers, including low-income and non-English-
speaking customers, about changes in the provision of electric
service resulting from the opening of the retail electric market and
the customer choice pilot program under this chapter. The
educational program shall be neutral and nonpromotional and shall
provide customers with the information necessary to make informed
decisions relating to the source and type of electric service
available for purchase and other information the commission considers
necessary. The educational program shall inform customers of their
rights and of the protections available through the commission and
the office. The educational program may not duplicate customer
information efforts undertaken by retail electric providers or other
private entities. The educational program may not be targeted to
areas served by municipally owned utilities or electric cooperatives
that have not adopted customer choice. In planning and implementing
this program, the commission shall consult with the office, with the
Texas Department of Housing and Community Affairs, and with customers
of and providers of retail electric service. The commission may
enter into contracts for professional services to carry out the
customer education program.
(b) Repealed by Acts 2011, 82nd Leg., R.S., Ch. 1083, Sec.
25(162), eff. June 17, 2011.
(c) After the opening of the retail electric market, the
commission shall conduct ongoing customer education designed to help
customers make informed choices of electric services and retail
electric providers. As part of ongoing education, the commission may

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provide customers information concerning specific retail electric

providers, including instances of complaints against them and records
relating to quality of customer service.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.
Amended by:
Acts 2011, 82nd Leg., R.S., Ch. 1083 (S.B. 1179), Sec. 25(162),
eff. June 17, 2011.

Sec. 39.9025. HOME ELECTRIC ENERGY REPORTS. The commission may

encourage retail electric providers to deliver individualized home
electric energy reports to educate consumers about electric energy
use and energy efficiency to assist consumers to use energy more
efficiently.

Added by Acts 2007, 80th Leg., R.S., Ch. 939 (H.B. 3693), Sec. 21,
eff. September 1, 2007.

This section expired September 1, 2017, according to the date

provided by Subsection (m).
Sec. 39.903. SYSTEM BENEFIT FUND. (a) The system benefit fund
is an account in the general revenue fund. Money in the account may
be appropriated only for the purposes provided by this section or
other law. Interest earned on the system benefit fund shall be
credited to the fund. Section 403.095, Government Code, does not
apply to the system benefit fund.
(b) The system benefit fund is financed by a nonbypassable fee
set by the commission in an amount not to exceed 65 cents per
megawatt hour. The system benefit fund fee is allocated to customers
based on the amount of kilowatt hours used.
(c) The nonbypassable fee may not be imposed on the retail
electric customers of a municipally owned utility or electric
cooperative before the sixth month preceding the date on which the
utility or cooperative implements customer choice. Money distributed
from the system benefit fund to a municipally owned utility or an
electric cooperative shall be proportional to the nonbypassable fee
paid by the municipally owned utility or the electric cooperative,
subject to the reimbursement provided by Subsection (i). On request

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by a municipally owned utility or electric cooperative, the

commission shall reduce the nonbypassable fee imposed on retail
electric customers served by the municipally owned utility or
electric cooperative by an amount equal to the amount provided by the
municipally owned utility or electric cooperative or its ratepayers
for local low-income programs and local programs that educate
customers about the retail electric market in a neutral and
nonpromotional manner.
(d) The commission shall annually review and approve system
benefit fund accounts, projected revenue requirements, and proposed
nonbypassable fees.
(e) Money in the system benefit fund may be appropriated to
provide funding solely for the following regulatory purposes, in the
following order of priority:
(1) programs to:
(A) assist low-income electric customers by providing
the 10 percent reduced rate prescribed by Subsection (h); and
(B) provide one-time bill payment assistance to
electric customers who are or who have in their households one or
more seriously ill or disabled low-income persons and who have been
threatened with disconnection for nonpayment;
(2) customer education programs, administrative expenses
incurred by the commission in implementing and administering this
chapter, and expenses incurred by the office under this chapter;
(3) programs to assist low-income electric customers by
providing the targeted energy efficiency programs described by
Subsection (f)(2);
(4) programs to assist low-income electric customers by
providing the 20 percent reduced rate prescribed by Subsection (h);
and
(5) reimbursement to the commission and the Health and
Human Services Commission for expenses incurred in the implementation
and administration of an integrated eligibility process created under
Section 17.007 for customer service discounts relating to retail
electric service, including outreach expenses the commission
determines are reasonable and necessary.
(f) Notwithstanding Section 39.106(b), the commission shall
adopt rules regarding programs to assist low-income electric
customers on the introduction of customer choice. The programs may
not be targeted to areas served by municipally owned utilities or

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electric cooperatives that have not adopted customer choice. The

programs shall include:
(1) reduced electric rates as provided by Subsections (h)-
(l); and
(2) targeted energy efficiency programs to be administered
by the Texas Department of Housing and Community Affairs in
coordination with existing weatherization programs.
(g) Until customer choice is introduced in a power region, an
electric utility may not reduce, in any manner, programs already
offered to assist low-income electric customers.
(h) The commission shall adopt rules for a retail electric
provider to determine a reduced rate for eligible customers to be
discounted off the standard retail service package as approved by the
commission under Section 39.106, or the price to beat established by
Section 39.202, whichever is lower. Municipally owned utilities and
electric cooperatives shall establish a reduced rate for eligible
customers to be discounted off the standard retail service package
established under Section 40.053 or 41.053, as appropriate. The
reduced rate for a retail electric provider shall result in a total
charge that is at least 10 percent and, if sufficient money in the
system benefit fund is available, up to 20 percent, lower than the
amount the customer would otherwise be charged. To the extent the
system benefit fund is insufficient to fund the initial 10 percent
rate reduction, the commission may increase the fee to an amount not
more than 65 cents per megawatt hour, as provided by Subsection (b).
If the fee is set at 65 cents per megawatt hour or if the commission
determines that appropriations are insufficient to fund the 10
percent rate reduction, the commission may reduce the rate reduction
to less than 10 percent. For a municipally owned utility or electric
cooperative, the reduced rate shall be equal to an amount that can be
fully funded by that portion of the nonbypassable fee proceeds paid
by the municipally owned utility or electric cooperative that is
allocated to the utility or cooperative by the commission under
Subsection (e) for programs for low-income customers of the utility
or cooperative. The reduced rate for municipally owned utilities and
electric cooperatives under this section is in addition to any rate
reduction that may result from local programs for low-income
customers of the municipally owned utilities or electric
cooperatives.
(i) A retail electric provider, municipally owned utility, or

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electric cooperative seeking reimbursement from the system benefit

fund may not charge an eligible low-income customer a rate higher
than the appropriate rate determined under Subsection (h). A retail
electric provider not subject to the price to beat, or a municipally
owned utility or electric cooperative subject to the nonbypassable
fee under Subsection (c), shall be reimbursed from the system benefit
fund for the difference between the reduced rate and the rate
established under Section 39.106 or, as appropriate, the rate
established under Section 40.053 or 41.053. A retail electric
provider who is subject to the price to beat shall be reimbursed from
the system benefit fund for the difference between the reduced rate
and the price to beat. The commission shall adopt rules providing
for the reimbursement.
(j) The commission shall adopt rules providing for methods of
enrolling customers eligible to receive reduced rates under
Subsection (h). The rules must provide for automatic enrollment as
one enrollment option. The Texas Department of Human Services, on
request of the commission, shall assist in the adoption and
implementation of these rules. The commission and the Texas
Department of Human Services shall enter into a memorandum of
understanding establishing the respective duties of the commission
and the department in relation to the automatic enrollment.
(j-1) The commission shall adopt rules governing the bill
payment assistance program provided under Subsection (e)(1)(B). The
rules must provide that a customer is eligible to receive the
assistance only if the assistance is necessary to prevent the
disconnection of service for nonpayment of bills and the electric
customer is or has in the customer's household one or more seriously
ill or disabled low-income persons whose health or safety may be
injured by the disconnection. The commission may prescribe the
documentation necessary to demonstrate eligibility for the assistance
and may establish additional eligibility criteria. The Health and
Human Services Commission, on request of the commission, shall assist
in the adoption and implementation of these rules.
(k) A retail electric provider is prohibited from charging the
customer a fee for participation in the reduced rate program.
(l) For the purposes of this section, a "low-income electric
customer" is an electric customer:
(1) whose household income is not more than 125 percent of
the federal poverty guidelines; or

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(2) who receives food stamps from the Texas Department of

Human Services or medical assistance from a state agency
administering a part of the medical assistance program.
(m) This section expires September 1, 2017.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.
Amended by Acts 2001, 77th Leg., ch. 1466, Sec. 19(a), eff. June 15,
2001; Acts 2001, 77th Leg., ch. 1394, Sec. 3, eff. Sept. 1, 2001;
Acts 2001, 77th Leg., ch. 1451, Sec. 3, eff. Sept. 1, 2001; Acts
2003, 78th Leg., ch. 211, Sec. 2.02, eff. June 16, 2003; Acts 2003,
78th Leg., ch. 1296, Sec. 4(a), eff. June 20, 2003.
Amended by:
Acts 2005, 79th Leg., Ch. 412 (S.B. 1652), Sec. 17, eff.
September 1, 2005.
Acts 2005, 79th Leg., Ch. 728 (H.B. 2018), Sec. 21.001, eff.
September 1, 2005.
Acts 2005, 79th Leg., Ch. 797 (S.B. 408), Sec. 11, eff. September
1, 2005.
Acts 2005, 79th Leg., Ch. 797 (S.B. 408), Sec. 12, eff. September
1, 2005.
Acts 2005, 79th Leg., Ch. 899 (S.B. 1863), Sec. 14.01, eff.
August 29, 2005.
Acts 2013, 83rd Leg., R.S., Ch. 170 (H.B. 1600), Sec. 1.10, eff.
September 1, 2013.
Acts 2013, 83rd Leg., R.S., Ch. 835 (H.B. 7), Sec. 16, eff. June
14, 2013.
Acts 2015, 84th Leg., R.S., Ch. 706 (H.B. 1101), Sec. 1, eff.
June 17, 2015.

Sec. 39.9044. GOAL FOR NATURAL GAS. (a) It is the intent of

the legislature that 50 percent of the megawatts of generating
capacity installed in this state after January 1, 2000, use natural
gas. To the extent permitted by law, the commission shall establish
a program to encourage utilities to comply with this section by using
natural gas produced in this state as the preferential fuel. This
section does not apply to generating capacity for renewable energy
technologies.
(b) The commission shall establish a natural gas energy credits
trading program. Any power generation company, municipally owned

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utility, or electric cooperative that does not satisfy the

requirements of Subsection (a) by directly owning or purchasing
capacity using natural gas technologies shall purchase sufficient
natural gas energy credits to satisfy the requirements by holding
natural gas energy credits in lieu of capacity from natural gas
energy technologies.
(c) Not later than January 1, 2000, the commission shall adopt
rules necessary to administer and enforce this section and to perform
any necessary studies in cooperation with the Railroad Commission of
Texas. At a minimum, the rules shall:
(1) establish the minimum annual natural gas generation
requirement for each power generation company, municipally owned
utility, and electric cooperative operating in this state in a manner
reasonably calculated by the commission to produce, on a statewide
basis, compliance with the requirement prescribed by Subsection (a);
and
(2) specify reasonable performance standards that all
natural gas capacity additions must meet to count against the
requirement prescribed by Subsection (a) and that:
(A) are designed and operated so as to maximize the
energy output from the capacity additions in accordance with then-
current industry standards and best industry standards; and
(B) encourage the development, construction, and
operation of new natural gas energy projects at those sites in this
state that have the greatest economic potential for capture and
development of this state's environmentally beneficial natural gas
resources.
(d) The commission, with the assistance of the Railroad
Commission of Texas, shall adopt rules allowing and encouraging
retail electric providers and municipally owned utilities and
electric cooperatives that have adopted customer choice to market
electricity generated using natural gas produced in this state as
environmentally beneficial. The rules shall allow a provider,
municipally owned utility, or cooperative to:
(1) emphasize that natural gas produced in this state is
the cleanest-burning fossil fuel; and
(2) label the electricity generated using natural gas
produced in this state as "green" electricity.
(e) In this section, "natural gas technology" means any
technology that exclusively relies on natural gas as a primary fuel

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source.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 39.9048. NATURAL GAS FUEL. It is the intent of the

legislature that:
(1) the cost of generating electricity remain as low as
possible; and
(2) the state establish and publicize a program to keep the
costs of fuel, such as natural gas, used for generating electricity
low.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 39.905. GOAL FOR ENERGY EFFICIENCY. (a) It is the goal

of the legislature that:
(1) electric utilities will administer energy efficiency
incentive programs in a market-neutral, nondiscriminatory manner but
will not offer underlying competitive services;
(2) all customers, in all customer classes, will have a
choice of and access to energy efficiency alternatives and other
choices from the market that allow each customer to reduce energy
consumption, summer and winter peak demand, or energy costs;
(3) each electric utility annually will provide, through
market-based standard offer programs or through targeted market-
transformation programs, incentives sufficient for retail electric
providers and competitive energy service providers to acquire
additional cost-effective energy efficiency, subject to cost ceilings
established by the commission, for the utility's residential and
commercial customers equivalent to:
(A) not less than:
(i) 30 percent of the electric utility's annual
growth in demand of residential and commercial customers by December
31 of each year beginning with the 2013 calendar year; and
(ii) the amount of energy efficiency to be acquired
for the utility's residential and commercial customers for the most
recent preceding year; and
(B) for an electric utility whose amount of energy
efficiency to be acquired under this subsection is equivalent to at

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least four-tenths of one percent of the electric utility's summer

weather-adjusted peak demand for residential and commercial customers
in the previous calendar year, not less than:
(i) four-tenths of one percent of the utility's
summer weather-adjusted peak demand for residential and commercial
customers by December 31 of each subsequent year; and
(ii) the amount of energy efficiency to be acquired
for the utility's residential and commercial customers for the most
recent preceding year;
(4) each electric utility in the ERCOT region shall use its
best efforts to encourage and facilitate the involvement of the
region's retail electric providers in the delivery of efficiency
programs and demand response programs under this section, including
programs for demand-side renewable energy systems that:
(A) use distributed renewable generation, as defined by
Section 39.916; or
(B) reduce the need for energy consumption by using a
renewable energy technology, a geothermal heat pump, a solar water
heater, or another natural mechanism of the environment;
(5) retail electric providers in the ERCOT region, and
electric utilities outside of the ERCOT region, shall provide
customers with energy efficiency educational materials; and
(6) notwithstanding Subsection (a)(3), electric utilities
shall continue to make available, at 2007 funding and participation
levels, any load management standard offer programs developed for
industrial customers and implemented prior to May 1, 2007.
(b) The commission shall provide oversight and adopt rules and
procedures to ensure that the utilities can achieve the goal of this
section, including:
(1) establishing an energy efficiency cost recovery factor
for ensuring timely and reasonable cost recovery for utility
expenditures made to satisfy the goal of this section;
(2) establishing an incentive under Section 36.204 to
reward utilities administering programs under this section that
exceed the minimum goals established by this section;
(3) providing a utility that is unable to establish an
energy efficiency cost recovery factor in a timely manner due to a
rate freeze with a mechanism to enable the utility to:
(A) defer the costs of complying with this section; and
(B) recover the deferred costs through an energy

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efficiency cost recovery factor on the expiration of the rate freeze

period;
(4) ensuring that the costs associated with programs
provided under this section and any shareholder bonus awarded are
borne by the customer classes that receive the services under the
programs;
(5) ensuring the program rules encourage the value of the
incentives to be passed on to the end-use customer;
(6) ensuring that programs are evaluated, measured, and
verified using a framework established by the commission that
promotes effective program design and consistent and streamlined
reporting; and
(7) ensuring that an independent organization certified
under Section 39.151 allows load participation in all energy markets
for residential, commercial, and industrial customer classes, either
directly or through aggregators of retail customers, to the extent
that load participation by each of those customer classes complies
with reasonable requirements adopted by the organization relating to
the reliability and adequacy of the regional electric network and in
a manner that will increase market efficiency, competition, and
customer benefits.
(b-1) The energy efficiency cost recovery factor under
Subsection (b)(1) may not result in an over-recovery of costs but may
be adjusted each year to change rates to enable utilities to match
revenues against energy efficiency costs and any incentives to which
they are granted. The factor shall be adjusted to reflect any over-
collection or under-collection of energy efficiency cost recovery
revenues in previous years.
(b-2) Repealed by Acts 2011, 82nd Leg., R.S., Ch. 180, Sec. 3,
eff. September 1, 2011.
(b-3) Beginning not later than January 1, 2008, the commission,
in consultation with the State Energy Conservation Office, annually
for a period of five years shall compute and report to ERCOT the
projected energy savings and demand impacts for each entity in the
ERCOT region that administers standard offer programs, market
transformation programs, combined heating and power technology,
demand response programs, solar incentive programs, appliance
efficiency standards, energy efficiency programs in public buildings,
and any other relevant programs that are reasonably anticipated to
reduce electricity energy or peak demand or that serve as substitutes

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for electric supply.

(b-4) The commission and ERCOT shall develop a method to
account for the projected efficiency impacts under Subsection (b-3)
in ERCOT's annual forecasts of future capacity, demand, and reserves.
(c) A standard offer program provided under Subsection (a)(3)
must be neutral with respect to technologies, equipment, and fuels,
including thermal, chemical, mechanical, and electrical energy
storage technologies.
(d) The commission shall establish a procedure for reviewing
and evaluating market-transformation program options described by
this subsection and other options. In evaluating program options,
the commission may consider the ability of a program option to reduce
costs to customers through reduced demand, energy savings, and relief
of congestion. Utilities may choose to implement any program option
approved by the commission after its evaluation in order to satisfy
the goal in Subsection (a), including:
(1) energy-smart schools;
(2) appliance retirement and recycling;
(3) air conditioning system tune-ups;
(4) the installation of variable speed air conditioning
systems, motors, and drives;
(5) the use of trees or other landscaping for energy
efficiency;
(6) customer energy management and demand response
programs;
(7) high performance residential and commercial buildings
that will achieve the levels of energy efficiency sufficient to
qualify those buildings for federal tax incentives;
(8) commissioning services for commercial and institutional
buildings that result in operational and maintenance practices that
reduce the buildings' energy consumption;
(9) programs for customers who rent or lease their
residence or commercial space;
(10) programs providing energy monitoring equipment to
customers that enable a customer to better understand the amount,
price, and time of the customer's energy use;
(11) energy audit programs for owners and other residents
of single-family or multifamily residences and for small commercial
customers;
(12) net-zero energy new home programs;

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(13) solar thermal or solar electric programs;

(14) programs for using windows and other glazing systems,
glass doors, and skylights in residential and commercial buildings
that reduce solar gain by at least 30 percent from the level
established for the federal Energy Star windows program;
(15) data center efficiency programs; and
(16) energy use programs with measurable and verifiable
results that reduce energy consumption through behavioral changes
that lead to efficient use patterns and practices.
(e) An electric utility may use money approved by the
commission for energy efficiency programs to perform necessary energy
efficiency research and development to foster continuous improvement
and innovation in the application of energy efficiency technology and
energy efficiency program design and implementation. Money the
utility uses under this subsection may not exceed 10 percent of the
greater of:
(1) the amount the commission approved for energy
efficiency programs in the utility's most recent full rate
proceeding; or
(2) the commission-approved expenditures by the utility for
energy efficiency in the previous year.
(f) Each unbundled transmission and distribution utility shall
include in its energy efficiency plan a targeted low-income energy
efficiency program, and the savings achieved by the program shall
count toward the transmission and distribution utility's energy
efficiency goal. The commission shall determine the appropriate
level of funding to be allocated to both targeted and standard offer
low-income energy efficiency programs in each unbundled transmission
and distribution utility service area. The level of funding for low-
income energy efficiency programs shall be provided from money
approved by the commission for the transmission and distribution
utility's energy efficiency programs. The commission shall ensure
that annual expenditures for the targeted low-income energy
efficiency programs of each unbundled transmission and distribution
utility are not less than 10 percent of the transmission and
distribution utility's energy efficiency budget for the year. A
targeted low-income energy efficiency program must comply with the
same audit requirements that apply to federal weatherization
subrecipients. In an energy efficiency cost recovery factor
proceeding related to expenditures under this subsection, the

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commission shall make findings of fact regarding whether the utility

meets requirements imposed under this subsection. The state agency
that administers the federal weatherization assistance program shall
participate in energy efficiency cost recovery factor proceedings
related to expenditures under this subsection to ensure that targeted
low-income weatherization programs are consistent with federal
weatherization programs and adequately funded.
(g) The commission may provide for a good cause exemption to a
utility's liability for an administrative penalty or other sanction
if the utility fails to meet a goal for energy efficiency under this
section and the utility's failure to meet the goal is caused by one
or more factors outside of the utility's control, including:
(1) insufficient demand by retail electric providers and
competitive energy service providers for program incentive funds made
available by the utility through its programs;
(2) changes in building energy codes; and
(3) changes in government-imposed appliance or equipment
efficiency standards.
(h) For an electric utility operating in an area not open to
competition, the utility may achieve the goal of this section by:
(1) providing rebate or incentive funds directly to
customers to promote or facilitate the success of programs
implemented under this section; or
(2) developing, subject to commission approval, new
programs other than standard offer programs and market transformation
programs, to the extent that the new programs satisfy the same cost-
effectiveness requirements as standard offer programs and market
transformation programs.
(i) For an electric utility operating in an area open to
competition, on demonstration to the commission, after a contested
case hearing, that the requirements under Subsection (a) cannot be
met in a rural area through retail electric providers or competitive
energy service providers, the utility may achieve the goal of this
section by providing rebate or incentive funds directly to customers
in the rural area to promote or facilitate the success of programs
implemented under this section.
(j) An electric utility may use energy audit programs to
achieve the goal of this section if:
(1) the programs do not constitute more than three percent
of total program costs under this section; and

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(2) the addition of the programs does not cause a utility's

portfolio of programs to no longer be cost-effective.
(k) To help a residential or nongovernmental nonprofit customer
make informed decisions regarding energy efficiency, the commission
may consider program designs that ensure, to the extent practicable,
the customer is provided with information using standardized forms
and terms that allow the customer to compare offers for varying
degrees of energy efficiency attainable using a measure the customer
is considering by cost, estimated energy savings, and payback
periods.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.
Amended by:
Acts 2005, 79th Leg., Ch. 328 (S.B. 712), Sec. 1, eff. September
1, 2005.
Acts 2007, 80th Leg., R.S., Ch. 939 (H.B. 3693), Sec. 22, eff.
September 1, 2007.
Acts 2011, 82nd Leg., R.S., Ch. 180 (S.B. 1125), Sec. 1, eff.
September 1, 2011.
Acts 2011, 82nd Leg., R.S., Ch. 180 (S.B. 1125), Sec. 3, eff.
September 1, 2011.
Acts 2011, 82nd Leg., R.S., Ch. 1346 (S.B. 1434), Sec. 1, eff.
June 17, 2011.
Acts 2013, 83rd Leg., R.S., Ch. 1079 (H.B. 3361), Sec. 4.01, eff.
September 1, 2013.
Acts 2019, 86th Leg., R.S., Ch. 467 (H.B. 4170), Sec. 16.003,
eff. September 1, 2019.

Sec. 39.9051. ENERGY EFFICIENCY FOR MUNICIPALLY OWNED

UTILITIES. (a) In this section, "municipally owned utility" has the
meaning assigned by Section 11.003.
(b) This section applies only to a municipally owned utility
that had retail sales of more than 500,000 megawatt hours in 2005.
(c) It is the goal of the legislature that:
(1) municipally owned utilities will administer energy
savings incentive programs;
(2) customers of a municipally owned utility will have a
choice of and access to energy efficiency alternatives that allow
customers to reduce energy consumption, peak demand, or energy costs;

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and
(3) each municipally owned utility will provide incentives
sufficient for municipally owned utilities to acquire additional
cost-effective energy efficiency.
(d) The governing body of a municipally owned utility shall
provide oversight and adopt rules and procedures, as necessary, to
ensure that the utility can achieve the goal of this section.
(e) If a municipally owned utility adopts customer choice by
decision of the governing body under Chapter 40, the commission shall
provide oversight and adopt rules and procedures, as necessary, to
ensure that the municipally owned utility can achieve the goal in
this section in a market-neutral, nondiscriminatory manner. The
commission shall, to the extent possible, include existing energy
efficiency programs already adopted by the municipally owned utility.
(f) Beginning April 1, 2012, a municipally owned utility must
report each year to the State Energy Conservation Office, on a
standardized form developed by the office, information regarding the
combined effects of the energy efficiency activities of the utility
from the previous calendar year, including the utility's annual
goals, programs enacted to achieve those goals, and any achieved
energy demand or savings goals.
(g) The State Energy Conservation Office shall provide the
reports made under Subsection (f) to the Energy Systems Laboratory at
the Texas Engineering Experiment Station of The Texas A&M University
System. The laboratory shall calculate the energy savings and
estimated pollution reductions that resulted from the reported
activities.
(h) The energy systems laboratory shall share the results of
the analysis with the Public Utility Commission of Texas, ERCOT, the
United States Environmental Protection Agency, and the Texas
Commission on Environmental Quality.

Added by Acts 2007, 80th Leg., R.S., Ch. 939 (H.B. 3693), Sec. 23,
eff. September 1, 2007.
Amended by:
Acts 2011, 82nd Leg., R.S., Ch. 1068 (S.B. 924), Sec. 1, eff.
September 1, 2011.

Sec. 39.9052. ENERGY EFFICIENCY FOR ELECTRIC COOPERATIVES. (a)

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An electric cooperative shall consider adopting and implementing

energy efficiency programs that reduce the cooperative's annual
growth in demand in a manner consistent with standards established in
the state for other utilities.
(b) Beginning April 1, 2012, an electric cooperative that had
retail sales of more than 500,000 megawatt hours in 2005 must report
each year to the State Energy Conservation Office, on a standardized
form developed by the office, information regarding the combined
effects of the energy efficiency activities of the electric
cooperative from the previous calendar year, including the electric
cooperative's annual goals, programs enacted to achieve those goals,
and any achieved energy demand or savings goals.
(c) The State Energy Conservation Office shall provide the
reports made under Subsection (b) to the Energy Systems Laboratory at
the Texas Engineering Experiment Station of The Texas A&M University
System. The laboratory shall calculate the energy savings and
estimated pollution reductions that resulted from the reported
activities.
(d) The energy systems laboratory shall share the results of
the analysis with the Public Utility Commission of Texas, ERCOT, the
United States Environmental Protection Agency, and the Texas
Commission on Environmental Quality.

Added by Acts 2007, 80th Leg., R.S., Ch. 939 (H.B. 3693), Sec. 23,
eff. September 1, 2007.
Amended by:
Acts 2011, 82nd Leg., R.S., Ch. 1068 (S.B. 924), Sec. 2, eff.
September 1, 2011.

Sec. 39.9054. ENERGY EFFICIENCY PLANS AND REPORTS; PUBLIC

INFORMATION. (a) An electric utility shall submit electronically an
energy efficiency plan and report in a searchable form prescribed by
the commission on or before April 1 of each year. The commission by
rule shall adopt a form that will permit the public to easily compare
information submitted by different electric utilities. The plan and
report must:
(1) provide information on the utility's performance in
achieving energy efficiency goals for the previous five years;
(2) describe how the utility intends to achieve future

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goals; and
(3) provide any other information the commission considers
relevant.
(b) On the Internet website found at
[Link] the commission shall publish information
on energy efficiency programs, including:
(1) an explanation of the goal for energy efficiency in
this state;
(2) a description of the types of energy efficiency
programs available to certain classes of eligible customers;
(3) a link to the plans and reports filed as prescribed by
Subsection (a); and
(4) a list of persons who install or provide energy
efficiency measures or services by area.
(c) This section does not require the commission to warrant
that the list required to be displayed under Subsection (b)
constitutes a complete or accurate list of all persons who install
energy efficiency measures or services in the marketplace.

Added by Acts 2011, 82nd Leg., R.S., Ch. 180 (S.B. 1125), Sec. 2, eff.
September 1, 2011.

Sec. 39.9055. EXAMINATION OF DEMAND RESPONSE POTENTIAL OF

SEAWATER DESALINATION PROJECTS. The commission and the ERCOT
independent system operator shall study the potential for seawater
desalination projects to participate in existing demand response
opportunities in the ERCOT market. To the extent feasible, the study
shall determine whether the operational characteristics of seawater
desalination projects enable projects of that kind to participate in
ERCOT-operated ancillary services markets or other competitively
supplied demand response opportunities. The study shall also
determine the potential economic benefit to a seawater desalination
project if the project is able to reduce its demand during peak
pricing periods. The commission shall include the results of the
study in the report required by Section 12.203.

Added by Acts 2015, 84th Leg., R.S., Ch. 829 (H.B. 4097), Sec. 2, eff.
June 17, 2015.
Amended by:
Acts 2023, 88th Leg., R.S., Ch. 410 (H.B. 1500), Sec. 35, eff.

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September 1, 2023.

Sec. 39.906. DISPLACED WORKERS. In order to mitigate potential

negative impacts on utility personnel directly affected by electric
industry restructuring, the commission shall allow the recovery of
reasonable employee-related transition costs incurred and projected
for severance, retraining, early retirement, outplacement, and
related expenses for the employees.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 39.908. EFFECT OF SUNSET PROVISION. If the commission is

abolished under Section 12.005 or other law, the authorities, duties,
and functions of the commission under this chapter shall be performed
and carried out by a successor agency to be designated by the
legislature before abolishment of the commission or, if the
legislature does not designate the successor, by the secretary of
state.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.
Amended by:
Acts 2023, 88th Leg., R.S., Ch. 410 (H.B. 1500), Sec. 36, eff.
September 1, 2023.

Sec. 39.909. PLAN AND REPORT OF WORKFORCE DIVERSITY AND OTHER

BUSINESS PRACTICES. (a) In this section, "small business" and
"historically underutilized business" have the meanings assigned by
former Section 481.191, Government Code, as that section existed on
January 1, 2015.
(b) Before January 1, 2000, each electric utility shall develop
and submit to the commission a comprehensive five-year plan to
enhance diversity of its workforce in all occupational categories and
to increase contracting opportunities for small and historically
underutilized businesses. The plan must consist of:
(1) the electric utility's historical and current
performance with regard to workforce diversity and contracting with
small and historically underutilized businesses;
(2) initiatives that the electric utility will pursue in

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these areas over the period of the plan;

(3) a listing of programs and activities the electric
utility will undertake to achieve each of those initiatives; and
(4) a listing of the business partnership initiatives the
electric utility will undertake to facilitate small and historically
underutilized business entry into the electric energy market as
generators and retail energy providers taking into account
opportunities for contracting and joint ventures.
(c) Each electric utility shall submit an annual report to the
commission and the legislature relating to its efforts to improve
workforce diversity and contracting opportunities for small and
historically underutilized businesses. The report must be submitted
on October 1 of each year or may be included as part of any other
annual report submitted by the electric utility to the commission.
The report must include:
(1) the diversity of the electric utility's workforce as of
the time of the report;
(2) the electric utility's level of contracting with small
and historically underutilized businesses;
(3) the specific progress made under the plan under
Subsection (b);
(4) the specific initiatives, programs, and activities
undertaken under the plan during the preceding year;
(5) an assessment of the success of each of those
initiatives, programs, and activities;
(6) the extent to which the electric utility has carried
out its initiatives to facilitate opportunities for contracts or
joint ventures with small and historically underutilized businesses;
and
(7) the initiatives, programs, and activities the electric
utility will pursue during the next year to increase the diversity of
its workforce and contracting opportunities for small and
historically underutilized businesses.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.
Amended by:
Acts 2015, 84th Leg., R.S., Ch. 364 (H.B. 2667), Sec. 4, eff.
September 1, 2015.

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Sec. 39.910. INCENTIVE PROGRAM AND GOAL FOR ENERGY EFFICIENCY

FOR MILITARY BASES. (a) The commission by rule shall establish an
electric energy efficiency incentive program under which each
electric utility in an area where customer choice is not available
will provide incentives sufficient for military bases, retail
electric providers, or competitive energy service providers to
install energy efficiency devices or other alternatives at military
bases. The commission shall design the program to provide military
bases with a variety of choices for cost-effective energy efficiency
devices and other alternatives from the market to reduce energy
consumption and energy costs.
(b) The commission shall establish a goal for the program to
reduce, before January 1, 2005, the consumption of electricity by
military bases in this state by five percent as compared to
consumption levels in 2002.
(c) The commission shall approve a nonbypassable surcharge or
other rate mechanism to recover costs associated with the program
established under this section.
(d) An electric utility shall administer the electric energy
efficiency incentive program in a market-neutral, nondiscriminatory
manner. An electric utility may not offer underlying competitive
services.

Added by Acts 2003, 78th Leg., ch. 149, Sec. 23, eff. May 27, 2003.

Sec. 39.911. ALTERNATIVE FUNDING FOR ENERGY EFFICIENCY AND

RENEWABLE ENERGY SYSTEMS. The State Energy Conservation Office, in
coordination with the governor, the Department of Agriculture, the
Texas Commission on Environmental Quality, the Texas Education
Agency, the commission, and other appropriate state agencies, shall
solicit gifts, grants, and other financial resources available to
fund energy efficiency improvements and renewable energy systems for
public and private facilities in this state.

Added by Acts 2007, 80th Leg., R.S., Ch. 939 (H.B. 3693), Sec. 23,
eff. September 1, 2007.

Sec. 39.9111. RULES RELATED TO RENEWABLE POWER FACILITIES. The

commission may adopt rules requiring renewable power facilities to

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have reactive power control capabilities or any other feasible

technology designed to reduce the facilities' effects on system
reliability.

Added by Acts 2023, 88th Leg., R.S., Ch. 410 (H.B. 1500), Sec. 37,
eff. September 1, 2023.

Sec. 39.9112. REPORT ON TRANSMISSION AND GENERATION CAPACITY.

The commission and the independent organization certified under
Section 39.151 for the ERCOT power region shall study the need for
increased transmission and generation capacity throughout this state
and report to the legislature the results of the study and any
recommendations for legislation. The report must be filed with the
legislature not later than December 31 of each even-numbered year.

Added by Acts 2023, 88th Leg., R.S., Ch. 410 (H.B. 1500), Sec. 37,
eff. September 1, 2023.

Sec. 39.9113. RENEWABLE ENERGY CREDITS. To facilitate

voluntary contractual obligations and verify claims regarding
environmental attributes of renewable energy production in this
state, the independent organization certified under Section 39.151
for the ERCOT power region shall maintain an accreditation and
banking system to award and track voluntary renewable energy credits
generated by eligible facilities.

Added by Acts 2023, 88th Leg., R.S., Ch. 410 (H.B. 1500), Sec. 37,
eff. September 1, 2023.

Sec. 39.912. REPORT ON COMBINED HEATING AND POWER TECHNOLOGY.

The commission shall study the installation and use of combined
heating and power technology in this state, and shall submit a report
regarding the commission's findings to the 81st Legislature. The
report shall include:
(1) an explanation describing combined heating and power
technology and its use; and
(2) an explanation of how combined heating and power
technology can be implemented in this state to meet energy efficiency

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goals.

Added by Acts 2007, 80th Leg., R.S., Ch. 939 (H.B. 3693), Sec. 23,
eff. September 1, 2007.

Sec. 39.913. COMBINING CERTAIN REPORTS. The commission may

combine the reports required under Sections 39.905(b-2) and 39.912.

Added by Acts 2007, 80th Leg., R.S., Ch. 939 (H.B. 3693), Sec. 23,
eff. September 1, 2007.

Sec. 39.914. CREDIT FOR SURPLUS SOLAR GENERATION BY PUBLIC

SCHOOLS. (a) An electric utility or retail electric provider shall
provide for net metering and contract with an independent school
district so that:
(1) surplus electricity produced by a school building's
solar electric generation panels is made available for sale to the
electric transmission grid and distribution system; and
(2) the net value of that surplus electricity is credited
to the district.
(b) For areas of this state in which customer choice has not
been introduced, the commission by rule shall require that credits
for electricity produced by a school building's solar electric
generation panels reflect the value of the electricity that is made
available for sale to the electric utility in accordance with federal
regulations.
(c) For independent school districts in areas in which customer
choice has been introduced, the district must sell the school
buildings' surplus electricity produced to the retail electric
provider that serves the school district's load at a value agreed to
between the district and the provider that serves the district's
load. The agreed value may be based on the clearing price of energy
at the time of day that the electricity is made available to the
grid. The independent organization identified in Section 39.151
shall develop procedures so that the amount of electricity purchased
from a district under this section is accounted for in settling the
total load served by the provider that serves the district's load. A
district requesting net metering services for purposes of this
section must have metering devices capable of providing measurements

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consistent with the independent organization's settlement

requirements.
(d) A transmission and distribution utility shall make
available to an independent school district for purposes of this
section metering required for services provided under this section,
including separate meters that measure the load and generator output
or a single meter capable of measuring separately in-flow and out-
flow at the point of common coupling meter point. The district must
pay the differential cost of the metering unless the meters are
provided at no additional cost. Except as provided by this section,
Section 39.107 applies to metering under this section.
(e) A municipally owned utility or electric cooperative shall
consider and complete the determinations regarding net metering
service as provided by the federal Public Utility Regulatory Policies
Act of 1978 (16 U.S.C. Section 2601 et seq., as amended by the
federal Energy Policy Act of 2005 (Pub. L. No. 109-58)) after
proceedings conducted in accordance with that law. A municipally
owned utility or electric cooperative shall report the determinations
made under this subsection to the State Energy Conservation Office
and include in that report information regarding metering electricity
generated by solar panels on public school building rooftops.

Added by Acts 2007, 80th Leg., R.S., Ch. 939 (H.B. 3693), Sec. 24,
eff. September 1, 2007.

Sec. 39.915. CONSIDERATION AND APPROVAL OF CERTAIN

TRANSACTIONS. (a) To protect retail customers in this state, and to
ensure the continuation of cost-effective energy efficiency measures
and delivery systems, notwithstanding any other provision of this
title, an electric utility or transmission and distribution utility
must report to and obtain approval of the commission before closing
any transaction in which:
(1) the electric utility or transmission and distribution
utility will be merged or consolidated with another electric utility
or transmission and distribution utility;
(2) at least 50 percent of the stock of the electric
utility or transmission and distribution utility will be transferred
or sold; or
(3) a controlling interest or operational control of the

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electric utility or transmission and distribution utility will be

transferred.
(b) The commission shall approve a transaction under Subsection
(a) if the commission finds that the transaction is in the public
interest. In making its determination, the commission shall consider
whether the transaction will adversely affect the reliability of
service, availability of service, or cost of service of the electric
utility or transmission and distribution utility. The commission
shall make the determination concerning a transaction under this
subsection not later than the 180th day after the date the commission
receives the relevant report. The commission may extend the deadline
provided by this subsection for not more than 60 days if the
commission determines the extension is needed to evaluate additional
information, to consider actions taken by other jurisdictions
concerning the transaction, to provide for administrative efficiency,
or for other good cause. If the commission has not made a
determination before the expiration of the deadline provided by or
extended under this subsection, the transaction is considered
approved.
(c) Subsections (a) and (b) do not apply to a transaction
described by Subsection (a) for which a definitive agreement was
executed before April 1, 2007, if an electric utility or transmission
and distribution utility or a person seeking to acquire or merge with
an electric utility or transmission and distribution utility made a
filing for review of the transaction under Section 14.101 before May
1, 2007, and the resulting proceeding was not withdrawn.
(d) If an electric utility or transmission and distribution
utility or a person seeking to acquire or merge with an electric
utility or transmission and distribution utility files with the
commission a stipulation, representation, or commitment in advance of
or as part of a filing under this section or under Section 14.101,
the commission may enforce the stipulation, representation, or
commitment to the extent that the stipulation, representation, or
commitment is consistent with the standards provided by this section
and Section 14.101. The commission may reasonably interpret and
enforce conditions adopted under this section.

Added by Acts 2007, 80th Leg., R.S., Ch. 939 (H.B. 3693), Sec. 25,
eff. September 1, 2007.
Amended by:

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Acts 2017, 85th Leg., R.S., Ch. 200 (S.B. 735), Sec. 4, eff. May
27, 2017.

Sec. 39.916. INTERCONNECTION OF DISTRIBUTED RENEWABLE

GENERATION. (a) In this section:
(1) "Distributed renewable generation" means electric
generation with a capacity of not more than 2,000 kilowatts provided
by a renewable energy technology that is installed on a retail
electric customer's side of the meter.
(2) "Distributed renewable generation owner" means:
(A) an owner of distributed renewable generation;
(B) a retail electric customer on whose side of the
meter distributed renewable generation is installed and operated,
regardless of whether the customer takes ownership of the distributed
renewable generation; or
(C) a person who by contract is assigned ownership
rights to energy produced from distributed renewable generation
located at the premises of the customer on the customer's side of the
meter.
(3) "Interconnection" means the right of a distributed
renewable generation owner to physically connect distributed
renewable generation to an electricity distribution system, and the
technical requirements, rules, or processes for the connection.
(4) "Renewable energy technology" means any technology that
relies exclusively on an energy source that is naturally regenerated
over a short time and is derived from the sun directly or indirectly
or from moving water or other natural movements or mechanisms of the
environment. The term includes a technology that relies on energy
derived from the sun directly, on wind, geothermal, hydroelectric,
wave, or tidal energy, or on biomass or biomass-based waste products,
including landfill gas. The term does not include a technology that
relies on an energy resource derived from a fossil fuel, a waste
product from a fossil fuel, or a waste product from an inorganic
source.
(b) A transmission and distribution utility or electric utility
shall allow interconnection if:
(1) the distributed renewable generation to be
interconnected has a five-year warranty against breakdown or undue
degradation; and

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(2) the rated capacity of the distributed renewable

generation does not exceed the transmission and distribution utility
or electric utility service capacity.
(c) A customer may request interconnection by filing an
application for interconnection with the transmission and
distribution utility or electric utility. Procedures of a
transmission and distribution utility or electric utility for the
submission and processing of a customer's application for
interconnection shall be consistent with rules adopted by the
commission regarding interconnection.
(d) The commission by rule shall establish safety, technical,
and performance standards for distributed renewable generation that
may be interconnected. In adopting the rules, the commission shall
consider standards published by the Underwriters Laboratories, the
National Electric Code, the National Electric Safety Code, and the
Institute of Electrical and Electronics Engineers.
(e) A transmission and distribution utility, electric utility,
or retail electric provider may not require a distributed renewable
generation owner whose distributed renewable generation meets the
standards established by rule under Subsection (d) to purchase an
amount, type, or classification of liability insurance the
distributed renewable generation owner would not have in the absence
of the distributed renewable generation.
(f) A transmission and distribution utility or electric utility
shall make available to a distributed renewable generation owner for
purposes of this section metering required for services provided
under this section, including separate meters that measure the load
and generator output or a single meter capable of measuring in-flow
and out-flow at the point of common coupling meter point. The
distributed renewable generation owner must pay the differential cost
of the metering unless the meters are provided at no additional cost.
Except as provided by this section, Section 39.107 applies to
metering under this section.
(g) Repealed by Acts 2023, 88th Leg., R.S., Ch. 410 (H.B. 1500
), Sec. 46(a)(5), eff. September 1, 2023.
(h) An electric utility or retail electric provider may
contract with a distributed renewable generation owner so that:
(1) surplus electricity produced by distributed renewable
generation is made available for sale to the transmission grid and
distribution system; and

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(2) the net value of that surplus electricity is credited

to the distributed renewable generation owner.
[(i) reserved]
(j) For distributed renewable generation owners in areas in
which customer choice has been introduced, the distributed renewable
generation owner must sell the owner's surplus electricity produced
to the retail electric provider that serves the distributed renewable
generation owner's load at a value agreed to between the distributed
renewable generation owner and the provider that serves the owner's
load which may include, but is not limited to, an agreed value based
on the clearing price of energy at the time of day that the
electricity is made available to the grid or it may be a credit
applied to an account during a billing period that may be carried
over to subsequent billing periods until the credit has been
redeemed. The independent organization identified in Section 39.151
shall develop procedures so that the amount of electricity purchased
from a distributed renewable generation owner under this section is
accounted for in settling the total load served by the provider that
serves that owner's load by January 1, 2009. A distributed renewable
generation owner requesting net metering services for purposes of
this section must have metering devices capable of providing
measurements consistent with the independent organization's
settlement requirements.
(k) Neither a retail electric customer that uses distributed
renewable generation nor the owner of the distributed renewable
generation that the retail electric customer uses is an electric
utility, power generation company, or retail electric provider for
the purposes of this title and neither is required to register with
or be certified by the commission if at the time distributed
renewable generation is installed, the estimated annual amount of
electricity to be produced by the distributed renewable generation is
less than or equal to the retail electric customer's estimated annual
electricity consumption.

Added by Acts 2007, 80th Leg., R.S., Ch. 939 (H.B. 3693), Sec. 26,
eff. September 1, 2007.
Amended by:
Acts 2011, 82nd Leg., R.S., Ch. 1070 (S.B. 981), Sec. 1, eff.
September 1, 2011.
Acts 2011, 82nd Leg., R.S., Ch. 1070 (S.B. 981), Sec. 2, eff.

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September 1, 2011.
Acts 2023, 88th Leg., R.S., Ch. 410 (H.B. 1500), Sec. 38, eff.
September 1, 2023.
Acts 2023, 88th Leg., R.S., Ch. 410 (H.B. 1500), Sec. 46(a)(5),
eff. September 1, 2023.

Sec. 39.9165. DISTRIBUTED GENERATION FACILITY REPORTING. (a)

In this section:
(1) "Distributed generation facility" is an electrical
generating facility, including an energy storage facility, that:
(A) is connected at a voltage less than 60 kilovolts;
and
(B) is capable of being connected in parallel operation
to the utility system.
(2) "Transmission service provider" means a transmission
and distribution utility, municipally owned utility, or electric
cooperative that owns or operates facilities used for the
transmission of electricity.
(b) An independent organization certified under Section 39.151
may establish protocols to require a person who owns or operates a
distributed generation facility interconnected to a utility system
operating in the power region served by the independent organization,
or who seeks to interconnect such a facility, to provide to the
interconnecting transmission and distribution utility, municipally
owned utility, or electric cooperative information about the
distributed generation facility that the independent organization
determines is necessary for maintaining system reliability.
(b-1) Protocols adopted under Subsection (b) may require that
the information be provided as a condition to interconnecting the
distributed generation facility.
(c) An independent organization certified under Section 39.151
may establish protocols to require a transmission service provider
operating in the power region served by the independent organization
to report to the independent organization, in aggregate by delivery
point, information the independent organization determines is
necessary for maintaining system reliability regarding distributed
generation facilities and distribution-connected loads that:
(1) are not registered with the independent organization;
and

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(2) are connected to the utility systems served by the

transmission service provider.
(d) An independent organization certified under Section 39.151
may establish protocols to require a transmission and distribution
utility, municipally owned utility, or electric cooperative that is
not required to report load information directly to the independent
organization regarding the delivery points interconnected with its
facilities to provide information to the utility's or cooperative's
transmission service provider for purposes of the report described by
Subsection (c).
(e) For a distributed generation facility interconnected before
September 1, 2023, any protocols the independent organization
certified under Section 39.151 establishes under Subsections (c) and
(d) may require a transmission and distribution utility, municipally
owned utility, or electric cooperative to:
(1) request information about the distributed generation
facility from the owner or operator of the facility; and
(2) in the absence of any timely response to the request
for information under Subdivision (1) or if the information
reasonably appears to be incorrect, provide to its transmission
service provider a good-faith estimate of the information based on
field observation or other data using reasonable engineering
judgment.
(f) Notwithstanding Subsection (e), the transmission and
distribution utility, municipally owned utility, or electric
cooperative, in fulfilling any reporting obligation, may rely on any
existing record regarding the information required for a distributed
generation facility, if the transmission and distribution utility,
municipally owned utility, or electric cooperative reasonably
believes the information is accurate.

Added by Acts 2021, 87th Leg., R.S., Ch. 426 (S.B. 3), Sec. 19, eff.
June 8, 2021.
Amended by:
Acts 2023, 88th Leg., R.S., Ch. 331 (H.B. 3390), Sec. 1, eff.
June 2, 2023.

Sec. 39.917. TEXAS ELECTRIC GRID SECURITY COUNCIL. (a) The

legislature finds that there is a public interest in mitigating the

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risk of cyber and physical attacks that may affect the reliability of
electric systems operating in Texas. The Texas Electric Grid
Security Council is established as an advisory body to facilitate the
creation, aggregation, coordination, and dissemination of best
security practices for the electric industry, including the
generation, transmission, and delivery of electricity.
(b) The Texas Electric Grid Security Council is composed of:
(1) the commissioner designated as presiding officer of the
commission under Section 12.052 or a representative designated by the
commissioner;
(2) the chief executive officer of the independent
organization certified under Section 39.151 for the ERCOT power
region or a representative designated by the chief executive officer;
and
(3) the governor or a representative designated by the
governor.
(c) The member of the council designated by Subsection (b)(1)
shall serve as presiding officer.
(d) The council shall convene at the call of the presiding
officer.
(e) A member of the council is not entitled to compensation.
Members are entitled to reimbursement for travel and other necessary
expenses related to the activities of the council as provided by the
General Appropriations Act.
(f) A member of the council may apply for a secret security
clearance or an interim security clearance granted by the United
States government. A member of the council may not access classified
information or participate in a briefing or meeting involving
classified information unless the member has a secret security
clearance.
(g) The independent organization certified under Section 39.151
shall:
(1) provide information and resources requested by the
council; and
(2) maintain nonclassified information obtained or created
by the council, provide members of the council with access to the
information, and retain the information for five years after the date
that the council obtains or creates the information.
(h) In carrying out its functions, the council may consult and
coordinate with:

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(1) the Texas Division of Emergency Management;

(2) the United States Department of Energy;
(3) the United States Department of Homeland Security;
(4) the North American Electric Reliability Corporation;
(5) the Texas Reliability Entity;
(6) federal and state agencies;
(7) members of the electric industry; and
(8) grid security experts.
(i) On a request by the governor, the lieutenant governor, the
chair of the house of representatives committee having jurisdiction
over energy utility regulation, or the chair of the senate committee
having jurisdiction over energy utility regulation, the council shall
issue to the requestor recommendations regarding:
(1) the development of educational programs or marketing
materials to promote the development of a grid security workforce;
(2) the development of grid security best practices;
(3) preparation for events that threaten grid security; and
(4) amendments to the state emergency management plan to
ensure coordinated and adaptable response and recovery efforts after
events that threaten grid security.
(j) The council may prepare a report outlining grid security
response efforts that do not involve classified or highly sensitive,
company-specific information. If the council prepares the report,
the council shall deliver the report to the governor, lieutenant
governor, and legislature on or before the December 1 immediately
preceding a regular session of the legislature.
(k) The meetings of the council and information obtained or
created by the council are not subject to the requirements of Chapter
551 or 552, Government Code.

Added by Acts 2019, 86th Leg., R.S., Ch. 516 (S.B. 475), Sec. 1, eff.
June 7, 2019.

Sec. 39.918. UTILITY FACILITIES FOR POWER RESTORATION AFTER

SIGNIFICANT POWER OUTAGE. (a) In this section, "significant power
outage" means an event that:
(1) results in a loss of electric power that:
(A) affects a significant number of distribution
customers of a transmission and distribution utility and has lasted

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or is expected to last for at least six hours;

(B) affects distribution customers of a transmission
and distribution utility in an area for which the governor has issued
a disaster or emergency declaration;
(C) affects distribution customers served by a radial
transmission or distribution facility, creates a risk to public
health or safety, and has lasted or is expected to last for at least
12 hours; or
(D) creates a risk to public health or safety because
it affects a critical infrastructure facility that serves the public
such as a hospital, health care facility, law enforcement facility,
fire station, or water or wastewater facility; or
(2) causes the independent system operator to order a
transmission and distribution utility to shed load.
(a-1) The Texas Division of Emergency Management, the
independent organization certified under Section 39.151 for the ERCOT
power region, or the executive director of the commission may
determine that a power outage other than an outage described by
Subsection (a) is a significant power outage for the purposes of this
section.
(b) Notwithstanding any other provision of this subtitle, a
transmission and distribution utility may:
(1) lease and operate facilities that provide temporary
emergency electric energy to aid in restoring power to the utility's
distribution customers during a significant power outage in which:
(A) the independent system operator has ordered the
utility to shed load; or
(B) the utility's distribution facilities are not being
fully served by the bulk power system under normal operations; and
(2) procure, own, and operate, or enter into a cooperative
agreement with other transmission and distribution utilities to
procure, own, and operate jointly, transmission and distribution
facilities that have a lead time of at least six months and would aid
in restoring power to the utility's distribution customers following
a significant power outage. In this section, long lead time
facilities may not be electric energy storage equipment or facilities
under Chapter 35.
(c) A transmission and distribution utility that leases and
operates facilities under Subsection (b)(1) may not sell electric
energy or ancillary services from those facilities.

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(d) Facilities described by Subsection (b)(1):

(1) must be operated in isolation from the bulk power
system; and
(2) may not be included in independent system operator:
(A) locational marginal pricing calculations;
(B) pricing; or
(C) reliability models.
(e) A transmission and distribution utility that leases and
operates facilities under Subsection (b)(1) shall ensure, to the
extent reasonably practicable, that retail customer usage during
operation of those facilities is adjusted out of the usage reported
for billing purposes by the retail customer's retail electric
provider.
(f) A transmission and distribution utility shall, when
reasonably practicable, use a competitive bidding process to lease
facilities under Subsection (b)(1).
(g) A transmission and distribution utility that leases and
operates facilities under Subsection (b)(1) or that procures, owns,
and operates facilities under Subsection (b)(2) shall include in the
utility's emergency operations plan filed with the commission, as
described by Section 186.007, a detailed plan on the utility's use of
those facilities.
(h) The commission shall permit:
(1) a transmission and distribution utility that leases and
operates facilities under Subsection (b)(1) to recover the reasonable
and necessary costs of leasing and operating the facilities,
including the present value of future payments required under the
lease, using the rate of return on investment established in the
commission's final order in the utility's most recent base rate
proceeding; and
(2) a transmission and distribution utility that procures,
owns, and operates facilities under Subsection (b)(2) to recover the
reasonable and necessary costs of procuring, owning, and operating
the facilities, using the rate of return on investment established in
the commission's final order in the utility's most recent base rate
proceeding.
(i) The commission shall authorize a transmission and
distribution utility to defer for recovery in a future ratemaking
proceeding the incremental operations and maintenance expenses and
the return, not otherwise recovered in a rate proceeding, associated

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with the leasing or procurement, ownership, and operation of the

facilities.
(j) A transmission and distribution utility may request
recovery of the reasonable and necessary costs of leasing or
procuring, owning, and operating facilities under this section,
including any deferred expenses, through a proceeding under Section
36.210 or in another ratemaking proceeding. A lease under Subsection
(b)(1) must be treated as a capital lease or finance lease for
ratemaking purposes.
(k) Repealed by Acts 2023, 88th Leg., R.S., Ch. 410 (H.B. 1500
), Sec. 46(a)(6), eff. September 1, 2023.

Added by Acts 2021, 87th Leg., R.S., Ch. 698 (H.B. 2483), Sec. 1, eff.
September 1, 2021.
Amended by:
Acts 2023, 88th Leg., R.S., Ch. 410 (H.B. 1500), Sec. 39, eff.
September 1, 2023.
Acts 2023, 88th Leg., R.S., Ch. 410 (H.B. 1500), Sec. 40, eff.
September 1, 2023.
Acts 2023, 88th Leg., R.S., Ch. 410 (H.B. 1500), Sec. 46(a)(6),
eff. September 1, 2023.
Acts 2023, 88th Leg., R.S., Ch. 768 (H.B. 4595), Sec. 22.004,
eff. September 1, 2023.

Sec. 39.919. AVERAGE TOTAL RESIDENTIAL LOAD REDUCTION GOALS.

(a) The commission by rule shall establish goals in the ERCOT power
region to reduce the average total residential load.
(b) The rules adopted under Subsection (a) must provide for the
adoption of a program that:
(1) provides demand response participation to residential
customers where reasonably available;
(2) promotes the use of smart metering technology;
(3) is capable of responding to an emergency energy alert
about low operating reserves issued by the independent organization
certified under Section 39.151 for the ERCOT power region;
(4) provides opportunities for demand response providers to
contract with retail electric providers to provide demand response
services;
(5) ensures the program does not impact the critical needs

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of vulnerable populations;
(6) facilitates the widespread deployment of smart
responsive appliances and devices in a manner that enables the
customer's appliance or device to be enrolled as part of a demand
response product or plan offered by a retail electric provider;
(7) establishes the method by which the components of the
ratio described by Subsection (c) are calculated for purposes of
determining whether the goals described by Subsection (a) have been
achieved;
(8) provides for achievement of demand reductions within
both summer and winter seasons; and
(9) allows a retail electric provider that offers a demand
response program under this section to obtain funding for the demand
response program through an energy efficiency incentive program
established under Section 39.905 if the program complies with
commission requirements related to the evaluation, measurement, and
verification of demand response programs adopted under Section
39.905.
(c) The goals described by Subsection (a) must be calculated as
a ratio by dividing the amount of load reduced at peak demand by the
total amount of demand, at the same time, of all residential
customers who have responsive appliances or devices at their premises
that reduce the electric consumption of the customers.
(d) A transmission and distribution utility required to provide
an energy efficiency incentive program under Section 39.905 may use
up to 10 percent of the budgeted spending for demand response
programs on the programs described by Subsection (b)(9).

Added by Acts 2023, 88th Leg., R.S., Ch. 945 (S.B. 1699), Sec. 5, eff.
September 1, 2023.

CHAPTER 40. COMPETITION FOR MUNICIPALLY OWNED UTILITIES AND RIVER

AUTHORITIES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 40.001. APPLICABLE LAW. (a) Notwithstanding any other
provision of law, except Sections 39.155, 39.157(e), and 39.203, this
chapter governs the transition to and the establishment of a fully
competitive electric power industry for municipally owned utilities.
With respect to the regulation of municipally owned utilities, this

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chapter controls over any other provision of this title, except for
sections in which the term "municipally owned utility" is
specifically used.
(b) Except as specifically provided in this subsection, Chapter
39 does not apply to a river authority operating a steam generating
plant on or before January 1, 1999, or a corporation authorized by
Chapter 152, Water Code, or Section 32.053. A river authority
operating a steam generating plant on or before January 1, 1999, is
subject to Sections 39.051(a)-(c), 39.108, 39.1516, 39.155,
39.157(e), and 39.203.
(c) For purposes of Section 39.051, hydroelectric assets may
not be deemed to be generating assets, and the transfer of generating
assets to a corporation authorized by Chapter 152, Water Code,
satisfies the requirements of Section 39.051.
(d) Accommodation shall be made in the code of conduct
established under Section 39.157(e) for the provisions of Chapter
152, Water Code, and the commission may not prohibit a river
authority and any related corporation from sharing officers,
directors, employees, equipment, and facilities or from providing
goods or services to each other at cost without the need for a
competitive bid.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.
Amended by Acts 2001, 77th Leg., ch. 1420, Sec. 8.401, eff. Sept. 1,
2001.
Amended by:
Acts 2019, 86th Leg., R.S., Ch. 467 (H.B. 4170), Sec. 16.004,
eff. September 1, 2019.
Acts 2019, 86th Leg., R.S., Ch. 610 (S.B. 936), Sec. 8, eff.
September 1, 2019.
Acts 2023, 88th Leg., R.S., Ch. 410 (H.B. 1500), Sec. 41, eff.
September 1, 2023.

Sec. 40.002. DEFINITION. For purposes of this chapter, "body

vested with the power to manage and operate a municipally owned
utility" means a body created in accordance with Section 1502.070,
Government Code, or Subchapter G, Chapter 552, Local Government Code,
or by municipal charter.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

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Amended by Acts 2001, 77th Leg., ch. 1420, Sec. 8.402, eff. Sept. 1,
2001.
Amended by:
Acts 2007, 80th Leg., R.S., Ch. 885 (H.B. 2278), Sec. 3.77(29),
eff. April 1, 2009.

Sec. 40.003. SECURITIZATION. (a) Municipally owned utilities

and river authorities may adopt and use securitization provisions
having the effect of the provisions provided by Subchapter G, Chapter
39, to recover through appropriate charges their stranded costs, at a
recovery level deemed appropriate by the municipally owned utility or
river authority up to 100 percent, under rules and procedures that
shall be established:
(1) in the case of a municipally owned utility, by the
municipal governing body or a body vested with the power to manage
and operate the municipally owned utility, including procedures
providing for rate orders of the governing body having the effect of
financing orders, providing for a separate nonbypassable charge
approved by the governing body, in the nature of a transition charge,
to be collected from all retail electric customers of the municipally
owned utility, identified as of a date determined by the governing
body, to fund the recovery of the stranded costs of the municipally
owned utility and of all reasonable related expenses, as determined
by the governing body, and providing for the issuance of bonds,
having a term and other characteristics as determined by the
governing body, as necessary to recover the amount deemed appropriate
by the governing body through securitization financing; and
(2) in the case of a river authority, by the commission.
(b) In order to implement securitization financing under the
rules and procedures established by and for a municipally owned
utility under Subsection (a)(1), municipalities are expressly
authorized and empowered to issue bonds, notes, or other obligations,
including refunding bonds, payable from and secured by a lien on and
pledge of the revenues collected under an order of the governing body
of the municipality, and the bonds shall be issued, without an
election or any requirement of giving notice of intent to issue the
bonds, by ordinance adopted by the governing body of the
municipality, in the form and manner and sold on a negotiated basis
or on receipt of bids and on the terms and conditions as shall be

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determined by the governing body of the municipality.

(c) Bonds issued under the authority conferred by Subsections
(a)(1) and (2) and Subsection (b) may be issued in the form and
manner, with or without credit enhancement or liquidity enhancement
and using the procedures as provided in Chapter 1201, Government
Code, or other laws applicable to the issuance of bonds, including
Subchapters A-C, Chapter 1207, Government Code, and Chapter 1371,
Government Code, as if those laws were fully restated in this section
and made a part of this section for all purposes, and a municipality
or river authority shall have the right and authority to use those
other laws, notwithstanding any applicable restrictions contained in
those laws, to the extent convenient or necessary to carry out any
power or authority, express or implied, granted under this section,
in the issuance of bonds by a municipality or river authority in
connection with securitization financing. This section is wholly
sufficient authority for the issuance of bonds, notes, or other
obligations, including refunding bonds, and the performance of the
other authorized acts and procedures, without reference to any other
laws or any restrictions or limitations contained in those laws. To
the extent of any conflict or inconsistency between the provisions of
this authorization and any provisions of any other law or home-rule
charter, the authorization and power to issue bonds conferred on
municipalities or river authorities under this section shall prevail
and control.
(d) The rules and procedures for securitization established by
the commission under Subsection (a)(2) shall include procedures for
the recovery of qualified costs under the terms of a financing order
adopted by the governing body of the river authority.
(e) The rules and procedures for securitization established by
the commission under Subsection (a)(2) shall include rules and
procedures for the issuance of transition bonds. Findings made by
the governing body of a river authority in a financing order issued
under the rules and procedures described in this subsection shall be
conclusive, and any transition charge incorporated in the rate order
to recover the principal, interest, and all reasonable expenses
associated with any transition bonds shall constitute property
rights, as described in Subchapter G, Chapter 39, and otherwise
conform in all material respects to the transition charges provided
by Subchapter G, Chapter 39.
(f) The rules and procedures established under this section

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shall be consistent with other law applicable to municipally owned

utilities and river authorities and with the terms of any
resolutions, orders, charter provisions, or ordinances authorizing
outstanding bonds or other indebtedness of the municipalities or
river authorities.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.
Amended by Acts 2001, 77th Leg., ch. 1420, Sec. 8.403, eff. Sept. 1,
2001.

Sec. 40.004. JURISDICTION OF COMMISSION. Except as

specifically otherwise provided in this chapter, the commission has
jurisdiction over municipally owned utilities only for the following
purposes:
(1) to regulate wholesale transmission rates and service,
including terms of access, to the extent provided by Subchapter A,
Chapter 35;
(2) to regulate certification of retail service areas to
the extent provided by Chapter 37;
(3) to regulate rates on appeal under Subchapters D and E,
Chapter 33, subject to Section 40.051(c);
(4) to establish a code of conduct as provided by Section
39.157(e) applicable to anticompetitive activities and to affiliate
activities limited to structurally unbundled affiliates of
municipally owned utilities, subject to Section 40.054;
(5) to establish terms and conditions for open access to
transmission and distribution facilities for municipally owned
utilities providing customer choice, as provided by Section 39.203;
(6) to administer the natural gas energy credits program
under Section 39.9044(b);
(7) to require reports of municipally owned utility
operations only to the extent necessary to:
(A) enable the commission to determine the aggregate
load and energy requirements of the state and the resources available
to serve that load; or
(B) enable the commission to determine information
relating to market power as provided by Section 39.155; and
(8) to evaluate and monitor the cybersecurity preparedness
of a municipally owned utility described by Section 39.1516(a)(3) or

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(4).

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.
Amended by:
Acts 2019, 86th Leg., R.S., Ch. 467 (H.B. 4170), Sec. 16.005,
eff. September 1, 2019.
Acts 2019, 86th Leg., R.S., Ch. 610 (S.B. 936), Sec. 9, eff.
September 1, 2019.
Acts 2023, 88th Leg., R.S., Ch. 410 (H.B. 1500), Sec. 42, eff.
September 1, 2023.

SUBCHAPTER B. MUNICIPALLY OWNED UTILITY CHOICE

Sec. 40.051. GOVERNING BODY DECISION. (a) The municipal
governing body or a body vested with the power to manage and operate
a municipally owned utility has the discretion to decide when or if
the municipally owned utility will provide customer choice.
(b) Municipally owned utilities may choose to participate in
customer choice at any time on or after January 1, 2002, by adoption
of an appropriate resolution of the municipal governing body or a
body vested with power to manage and operate the municipally owned
utility. The decision to participate in customer choice by the
adoption of a resolution is irrevocable.
(c) After a decision to offer customer choice has been made,
Subchapters D and E, Chapter 33, do not apply to any action taken
under this chapter.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 40.052. UTILITY NOT OFFERING CUSTOMER CHOICE. (a) A

municipally owned utility that has not chosen to participate in
customer choice may not offer electric energy at unregulated prices
directly to retail customers outside its certificated retail service
area.
(b) A municipally owned utility under Subsection (a) retains
the right to offer and provide a full range of customer service and
pricing programs to the customers within its certificated area and to
purchase and sell electric energy at wholesale without geographic
restriction.

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Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 40.053. RETAIL CUSTOMER'S RIGHT OF CHOICE. (a) If a

municipally owned utility chooses to participate in customer choice,
after that choice all retail customers served by the municipally
owned utility within the certificated retail service area of the
municipally owned utility shall have the right of customer choice
consistent with the provisions of this chapter, and the municipally
owned utility shall provide open access for retail service.
(b) Notwithstanding Section 39.107, the metering function may
not be deemed a competitive service for customers of the municipally
owned utility within that service area and may, at the option of the
municipally owned utility, continue to be offered by the municipally
owned utility as sole provider.
(c) On its initiation of customer choice, a municipally owned
utility may designate itself or one or more other entities as the
provider or providers of last resort for customers within the
municipally owned utility's certificated service area as that area
existed on the date of the utility's initiation of customer choice.
The municipally owned utility shall fulfill the role of default
provider of last resort in the event no other entity is available to
act in that capacity if the municipally owned utility continues to
sell electric energy to retail customers after the initiation of
customer choice. The municipally owned utility may delegate the
authority to designate the provider or providers of last resort to
the commission.
(d) If a customer is unable to obtain service from a retail
electric provider or a municipally owned utility or electric
cooperative offering customer choice, on request by the customer, the
applicable provider of last resort shall offer the customer the
standard retail service package for the appropriate customer class,
with no interruption of service, at a fixed, nondiscountable rate
that is at least sufficient to cover the reasonable costs of
providing that service, as approved by the governing body of the
municipally owned utility that has the authority to set rates. If a
provider of last resort is designated by the commission, the
commission may set the rate each provider of last resort may charge.
(e) The governing body of a municipally owned utility may
establish the procedures and criteria for designating a provider of

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last resort and may redesignate a provider of last resort according

to a schedule it considers appropriate. If the municipally owned
utility delegates authority to the commission under Subsection (c),
the commission is not required to comply with procedures or criteria
adopted by the municipally owned utility.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.
Amended by:
Acts 2023, 88th Leg., R.S., Ch. 54 (S.B. 1170), Sec. 1, eff. May
19, 2023.

Sec. 40.054. SERVICE OUTSIDE AREA. (a) A municipally owned

utility participating in customer choice shall have the right to
offer electric energy and related services at unregulated prices
directly to retail customers who have customer choice without regard
to geographic location.
(b) In providing service under Subsection (a) to retail
customers outside its certificated retail service area as that area
exists on the date of adoption of customer choice, a municipally
owned utility is subject to the commission's rules establishing a
code of conduct regulating anticompetitive practices.
(c) For municipally owned utilities participating in customer
choice, the commission shall have jurisdiction to establish terms and
conditions, but not rates, for access by other retail electric
providers to the municipally owned utility's distribution facilities.
(d) Accommodation shall be made in the commission's terms and
conditions for access and in the code of conduct for specific legal
requirements imposed by state or federal law applicable to
municipally owned utilities.
(e) The commission does not have jurisdiction to require
unbundling of services or functions of, or to regulate the recovery
of stranded investment of, a municipally owned utility or, except as
provided by this section, jurisdiction with respect to the rates,
terms, and conditions of service for retail customers of a
municipally owned utility within the utility's certificated service
area.
(f) A municipally owned utility shall maintain separate books
and records of its operations from those of the operations of any
affiliate.

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Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 40.055. JURISDICTION OF MUNICIPAL GOVERNING BODY. (a)

The municipal governing body or a body vested with the power to
manage and operate a municipally owned utility has exclusive
jurisdiction to:
(1) set all terms of access, conditions, and rates
applicable to services provided by the municipally owned utility,
subject to Sections 40.054 and 40.056, including nondiscriminatory
and comparable rates for distribution but excluding wholesale
transmission rates, terms of access, and conditions for wholesale
transmission service set by the commission under this subtitle,
provided that the rates for distribution access established by the
municipal governing body shall be comparable to the distribution
access rates that apply to the municipally owned utility and the
municipally owned utility's affiliates;
(2) determine whether to unbundle any energy-related
activities and, if the municipally owned utility chooses to unbundle,
whether to do so structurally or functionally;
(3) reasonably determine the amount of the municipally
owned utility's stranded investment;
(4) establish nondiscriminatory transition charges
reasonably designed to recover the stranded investment over an
appropriate period of time, provided that recovery of retail stranded
costs shall be from all existing or future retail customers,
including the facilities, premises, and loads of those retail
customers, within the utility's geographical certificated service
area as it existed on May 1, 1999;
(5) determine the extent to which the municipally owned
utility will provide various customer services at the distribution
level, including other services that the municipally owned utility is
legally authorized to provide, or will accept the services from other
providers;
(6) manage and operate the municipality's electric utility
systems, including exercise of control over resource acquisition and
any related expansion programs;
(7) establish and enforce service quality and reliability
standards and consumer safeguards designed to protect retail electric
customers, including safeguards that will accomplish the objectives

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of Sections 39.101(a) and (b), consistent with this chapter;

(8) determine whether a base rate reduction is appropriate
for the municipally owned utility;
(9) determine any other utility matters that the municipal
governing body or body vested with power to manage and operate the
municipally owned utility believes should be included;
(10) make any other decisions affecting the municipally
owned utility's participation in customer choice that are not
inconsistent with this chapter; and
(11) determine the extent to which the municipally owned
utility offers energy efficiency programs and how the programs are
administered by the utility, except as provided by Section
39.9051(e).
(b) In multiply certificated areas, a retail customer,
including a retail customer of an electric cooperative or a
municipally owned utility, may not avoid stranded cost recovery
charges by switching to another electric utility, electric
cooperative, or municipally owned utility.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.
Amended by:
Acts 2007, 80th Leg., R.S., Ch. 939 (H.B. 3693), Sec. 27, eff.
September 1, 2007.

Sec. 40.056. ANTICOMPETITIVE ACTIONS. (a) If, on complaint by

a retail electric provider, the commission finds that a municipal
rule, action, or order relating to customer choice is anticompetitive
or does not provide other retail electric providers with
nondiscriminatory terms and conditions of access to distribution
facilities or customers within the municipally owned utility's
certificated retail service area that are comparable to the
municipally owned utility's and its affiliates' terms and conditions
of access to distribution facilities or customers, the commission
shall notify the municipally owned utility.
(b) The municipally owned utility shall have three months to
cure the anticompetitive or noncompliant behavior described in
Subsection (a), following opportunity for hearing on the complaint.
If the rule, action, or order is not fully remedied within that time,
the commission may prohibit the municipally owned utility or

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affiliate from providing retail service outside its certificated

retail service area until the rule, action, or order is remedied.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 40.057. BILLING. (a) A municipally owned utility that

opts for customer choice may continue to bill directly electric
customers located in its certificated retail service area, as that
area exists on the date of adoption of customer choice, for all
transmission and distribution services. The municipally owned
utility may also bill directly for generation services and customer
services provided by the municipally owned utility to those
customers.
(b) A municipally owned utility that opts for customer choice
may not adopt anticompetitive billing practices that would discourage
customers in its service area from choosing a retail electric
provider.
(c) A municipally owned utility that opts for customer choice
and does not sell electric energy to retail customers is not required
to bill directly for distribution, transmission, and generation
services provided to retail electric customers located in its
certificated service area. A retail electric provider may provide
billing services for distribution, transmission, and generation
services provided to those customers.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.
Amended by:
Acts 2023, 88th Leg., R.S., Ch. 54 (S.B. 1170), Sec. 2, eff. May
19, 2023.

Sec. 40.058. TARIFFS FOR OPEN ACCESS. A municipally owned

utility that owns or operates transmission and distribution
facilities shall file with the commission tariffs implementing the
open access rules established by the commission under Section 39.203
and shall file with the commission the rates for open access on
distribution facilities as set by the municipal regulatory authority,
before the 90th day preceding the date the utility offers customer
choice. The commission does not have authority to determine the
rates for distribution access service for a municipally owned

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utility.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 40.059. MUNICIPAL POWER AGENCY; RECOVERY OF STRANDED

COSTS. (a) In this section, "member city" means a municipality that
participated in the creation of a municipal power agency formed under
Chapter 163 by the adoption of a concurrent resolution by the
municipality on or before August 1, 1975.
(b) After a member city adopts a resolution choosing to
participate in customer choice under Section 40.051(b), a member city
may include stranded costs described in Subsection (c) in its
distribution costs and may recover those costs through a
nonbypassable charge. The nonbypassable charge shall be as
determined by the member city's governing body and may be spread over
16 years.
(c) The stranded costs that may be recovered under this section
are those costs that were determined by the commission and stated in
the commission's April 1998 Report to the Texas Senate Interim
Committee on Electric Utility Restructuring entitled "Potentially
Strandable Investment (ECOM) Report: 1998 Update" and specifically
stated in the report at Appendix A (ECOM Estimates Including the
Effects of Transition Plans) under the commission base case benchmark
base market price for the year 2002.
(d) The stranded cost amounts described in this section may not
be included in the generation costs used in setting rates by the
member city's governing body.
(e) The provisions of this section are cumulative of all other
provisions of this chapter, and nothing in this section shall be
construed to limit or restrict the application of any provision of
this chapter to the member cities.
(f) The municipal power agency shall extinguish the agency's
indebtedness by sale of the electric facility to one or more
purchasers, by way of a sale through the issuance of taxable or tax-
exempt debt to the member cities, or by any other method. The agency
shall set as an objective the extinguishment of the agency's debt by
September 1, 2000. In the event this objective is not met, the
agency shall provide detailed reasons to the electric utility
restructuring legislative oversight committee by November 1, 2000,

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why the agency was not able to meet this objective.

(g) The municipal power agency or its successor in interest
may, at its option, use the rate of return method for calculating its
transmission cost of service. If the rate of return method is used,
the return component for the transmission cost of service revenue
requirement shall be sufficient to meet the transmission function's
pro rata share of levelized debt service and debt service coverage
ratio (1.50) and other annual debt obligations; provided, however,
that the total levelized debt service may not exceed the total debt
service under the current payment schedule. Any additional revenue
generated by the methodology described in this subsection shall be
applied to reduce the agency's outstanding indebtedness.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 40.060. NO POWER TO AMEND CERTIFICATES. Nothing in this

chapter empowers a municipal governing body or a body vested with the
power to manage and operate a municipally owned utility to issue,
amend, or rescind a certificate of public convenience and necessity
granted by the commission. This subsection does not affect the
ability of a municipal governing body or a body vested with the power
to manage and operate the municipally owned utility to pass a
resolution under Section 40.051(b).

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

SUBCHAPTER C. RIGHTS NOT AFFECTED

Sec. 40.101. INTERFERENCE WITH CONTRACT. (a) This subtitle
may not interfere with or abrogate the rights or obligations of
parties, including a retail or wholesale customer, to a contract with
a municipally owned utility or river authority.
(b) This subtitle may not interfere with or abrogate the rights
or obligations of a party under a contract or agreement concerning
certificated utility service areas.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 40.102. ACCESS TO WHOLESALE MARKET. Nothing in this

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subtitle shall limit the access of municipally owned utilities to the

wholesale electric market.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 40.103. PROTECTION OF BONDHOLDERS. Nothing in this

subtitle or any rule adopted under this subtitle shall impair
contracts, covenants, or obligations between this state, river
authorities, municipalities, and the bondholders of revenue bonds
issued by the river authorities or municipalities.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 40.104. TAX-EXEMPT STATUS. Nothing in this subtitle may

impair the tax-exempt status of municipalities, electric
cooperatives, or river authorities, nor shall anything in this
subtitle compel any municipality, electric cooperative, or river
authority to use its facilities in a manner that violates any
contractual provisions, bond covenants, or other restrictions
applicable to facilities financed by tax-exempt debt.
Notwithstanding any other provision of law, the decision to
participate in customer choice by the adoption of a resolution in
accordance with Section 40.051(b) is irrevocable.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

CHAPTER 41. ELECTRIC COOPERATIVES AND COMPETITION

SUBCHAPTER A. GENERAL PROVISIONS
Sec. 41.001. APPLICABLE LAW. Notwithstanding any other
provision of law, except Sections 39.155, 39.157(e), and 39.203, this
chapter governs the transition to and the establishment of a fully
competitive electric power industry for electric cooperatives.
Regarding the regulation of electric cooperatives, this chapter shall
control over any other provision of this title, except for sections
in which the term "electric cooperative" is specifically used.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.
Amended by:

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Acts 2019, 86th Leg., R.S., Ch. 467 (H.B. 4170), Sec. 16.006,
eff. September 1, 2019.
Acts 2023, 88th Leg., R.S., Ch. 410 (H.B. 1500), Sec. 43, eff.
September 1, 2023.

Sec. 41.002. DEFINITIONS. In this chapter:

(1) "Board of directors" means the board of directors of an
electric cooperative as described in Section 161.071.
(2) "Rate" includes any compensation, tariff, charge, fare,
toll, rental, or classification that is directly or indirectly
demanded, observed, charged, or collected by an electric cooperative
for any service, product, or commodity and any rule, practice, or
contract affecting the compensation, tariff, charge, fare, toll,
rental, or classification.
(3) "Stranded investment" means:
(A) the excess, if any, of the net book value of
generation assets over the market value of the generation assets;
and
(B) any above market purchased power costs.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 41.003. SECURITIZATION. (a) Electric cooperatives may

adopt and use securitization provisions having the effect of the
provisions provided by Subchapter G, Chapter 39, to recover through
rates stranded costs at a recovery level deemed appropriate by the
board of directors up to 100 percent, under rules and procedures that
shall be established by the commission.
(b) The rules and procedures for securitization established
under Subsection (a) shall include rules and procedures for the
recovery of stranded costs under the terms of a rate order adopted by
the board of directors of the electric cooperative, which rate order
shall have the effect of a financing order.
(c) The rules and procedures established by the commission
under Subsection (b) shall include rules and procedures for the
issuance of transition bonds issued in a securitized financing
transaction. The issuance of any transition bonds issued in a
securitized financing transaction by an electric cooperative is

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expressly authorized and shall be governed by the laws governing the

issuance of bonds or other obligations by the electric cooperative.
Findings made by the board of directors of an electric cooperative in
a rate order issued under the rules and procedures described by this
subsection shall be conclusive, and any transition charges
incorporated in the rate order to recover the principal, interest,
and all reasonable expenses associated with any securitized financing
transaction shall constitute property rights, as described in
Subchapter G, Chapter 39, and shall otherwise conform in all material
respects to the transition charges provided by Subchapter G, Chapter
39.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 41.004. JURISDICTION OF COMMISSION. Except as

specifically provided otherwise in this chapter, the commission has
jurisdiction over electric cooperatives only as follows:
(1) to regulate wholesale transmission rates and service,
including terms of access, to the extent provided in Subchapter A,
Chapter 35;
(2) to regulate certification to the extent provided in
Chapter 37;
(3) to establish a code of conduct as provided in Section
39.157(e) subject to Section 41.054;
(4) to establish terms and conditions, but not rates, for
open access to distribution facilities for electric cooperatives
providing customer choice, as provided in Section 39.203;
(5) to require reports of electric cooperative operations
only to the extent necessary to:
(A) ensure the public safety;
(B) enable the commission to satisfy its
responsibilities relating to electric cooperatives under this
chapter;
(C) enable the commission to determine the aggregate
electric load and energy requirements in the state and the resources
available to serve that load; or
(D) enable the commission to determine information
relating to market power as provided in Section 39.155; and
(6) to evaluate and monitor the cybersecurity preparedness

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of an electric cooperative described by Section 39.1516(a)(3) or (4).

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.
Amended by:
Acts 2019, 86th Leg., R.S., Ch. 610 (S.B. 936), Sec. 10, eff.
September 1, 2019.

Sec. 41.005. LIMITATION ON MUNICIPAL AUTHORITY.

Notwithstanding any other provision of this title, a municipality may
not directly or indirectly regulate the rates, operations, and
services of an electric cooperative, except, with respect to
operations, to the extent necessary to protect the public health,
safety, or welfare. This section does not prohibit a municipality
from making a lawful charge for the use of public rights-of-way
within the municipality as provided by Section 182.025, Tax Code, and
Section 33.008. An electric cooperative shall be an electric utility
for purposes of Section 182.025, Tax Code, and Section 33.008.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

SUBCHAPTER B. ELECTRIC COOPERATIVE UTILITY CHOICE

Sec. 41.051. BOARD DECISION. (a) The board of directors has
the discretion to decide when or if the electric cooperative will
provide customer choice.
(b) Electric cooperatives that choose to participate in
customer choice may do so at any time on or after January 1, 2002, by
adoption of an appropriate resolution of the board of directors. The
decision to participate in customer choice by the adoption of a
resolution may be revoked only if no customer has opted for choice
within four years of the resolution's adoption. An electric
cooperative may initiate a customer choice pilot project at any time.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 41.052. ELECTRIC COOPERATIVES NOT OFFERING CUSTOMER

CHOICE. (a) An electric cooperative that chooses not to participate
in customer choice may not offer electric energy at unregulated
prices directly to retail customers outside its certificated retail

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service area.
(b) An electric cooperative under Subsection (a) retains the
right to offer and provide a full range of customer service and
pricing programs to the customers within its certificated retail
service area and to purchase and sell electric energy at wholesale
without geographic restriction.
(c) A generation and transmission electric cooperative may
offer electric energy at unregulated prices directly to retail
customers outside of its parent electric cooperatives' certificated
service areas only if a majority of the parent electric cooperatives
of the generation and transmission electric cooperative have chosen
to offer customer choice.
(d) A subsidiary of an electric cooperative may not provide
electric energy at unregulated prices outside of its parent electric
cooperative's certificated retail service area unless the electric
cooperative offers customer choice inside its certificated retail
service area.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 41.053. RETAIL CUSTOMER RIGHT OF CHOICE. (a) If an

electric cooperative chooses to participate in customer choice, after
that choice, all retail customers within the certificated service
area of the electric cooperative shall have the right of customer
choice, and the electric cooperative shall provide nondiscriminatory
open access for retail service.
(b) Notwithstanding Section 39.107, the metering function may
not be deemed a competitive service for customers of the electric
cooperative within that service area and may, at the option of the
electric cooperative, continue to be offered by the electric
cooperative as sole provider.
(c) On its initiation of customer choice, an electric
cooperative shall designate itself or another entity as the provider
of last resort for retail customers within the electric cooperative's
certificated service area and shall fulfill the role of default
provider of last resort in the event no other entity is available to
act in that capacity.
(d) If a retail electric provider fails to serve a customer
described in Subsection (c), on request by the customer, the provider

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of last resort shall offer the customer the standard retail service
package for the appropriate customer class, with no interruption of
service, at a fixed, nondiscountable rate that is at least sufficient
to cover the reasonable costs of providing that service, as approved
by the board of directors.
(e) The board of directors may establish the procedures and
criteria for designating the provider of last resort and may
redesignate the provider of last resort according to a schedule it
considers appropriate.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 41.054. SERVICE OUTSIDE CERTIFICATED AREA. (a)

Notwithstanding any provisions of Chapter 161:
(1) an electric cooperative participating in customer
choice shall have the right to offer electric energy and related
services at unregulated prices directly to retail customers who have
customer choice without regard to geographic location; and
(2) any person, without restriction, except as may be
provided in the electric cooperative's articles of incorporation and
bylaws, may be a member of an electric cooperative.
(b) In providing service under Subsection (a) to retail
customers outside its certificated service area as that area exists
on the date of adoption of customer choice, an electric cooperative
becomes subject to commission jurisdiction as to the commission's
rules establishing a code of conduct regulating anticompetitive
practices under Section 39.157(e), except to the extent those rules
conflict with this chapter.
(c) For electric cooperatives participating in customer choice,
the commission shall have jurisdiction to establish terms and
conditions, but not rates, for access by other electric providers to
the electric cooperative's distribution facilities.
(d) Notwithstanding Subsections (b) and (c), the commission
shall make accommodation in the code of conduct for specific legal
requirements imposed by state or federal law applicable to electric
cooperatives. The commission shall accommodate the organizational
structures of electric cooperatives and may not prohibit an electric
cooperative and any related entity from sharing officers, directors,
or employees.

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(e) The commission does not have jurisdiction to require the

unbundling of services or functions of, or to regulate the recovery
of stranded investment of, an electric cooperative or, except as
provided by this section, jurisdiction with respect to the rates,
terms, and conditions of service for retail customers of an electric
cooperative within the electric cooperative's certificated service
area.
(f) An electric cooperative shall maintain separate books and
records of its operations and the operations of any subsidiary and
shall ensure that the rates charged for provision of electric service
do not include any costs of its subsidiary or any other costs not
related to the provision of electric service.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 41.055. JURISDICTION OF BOARD OF DIRECTORS. A board of

directors has exclusive jurisdiction to:
(1) set all terms of access, conditions, and rates
applicable to services provided by the electric cooperative, except
as provided by Sections 41.054 and 41.056, including
nondiscriminatory and comparable rates for distribution but excluding
wholesale transmission rates, terms of access, and conditions for
wholesale transmission service set by the commission under Subchapter
A, Chapter 35, provided that the rates for distribution established
by the electric cooperative shall be comparable to the distribution
rates that apply to the electric cooperative and its subsidiaries;
(2) determine whether to unbundle any energy-related
activities and, if the board of directors chooses to unbundle,
whether to do so structurally or functionally;
(3) reasonably determine the amount of the electric
cooperative's stranded investment;
(4) establish nondiscriminatory transition charges
reasonably designed to recover the stranded investment over an
appropriate period of time;
(5) determine the extent to which the electric cooperative
will provide various customer services, including nonelectric
services, or accept the services from other providers;
(6) manage and operate the electric cooperative's utility
systems, including exercise of control over resource acquisition and

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any related expansion programs;

(7) establish and enforce service quality standards,
reliability standards, and consumer safeguards designed to protect
retail electric customers;
(8) determine whether a base rate reduction is appropriate
for the electric cooperative;
(9) determine any other utility matters that the board of
directors believes should be included;
(10) sell electric energy and capacity at wholesale,
regardless of whether the electric cooperative participates in
customer choice;
(11) determine the extent to which the electric cooperative
offers energy efficiency programs and how the programs are
administered by the electric cooperative; and
(12) make any other decisions affecting the electric
cooperative's method of conducting business that are not inconsistent
with the provisions of this chapter.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.
Amended by:
Acts 2007, 80th Leg., R.S., Ch. 939 (H.B. 3693), Sec. 28, eff.
September 1, 2007.

Sec. 41.056. ANTICOMPETITIVE ACTIONS. (a) If, after notice

and hearing, the commission finds that an electric cooperative
providing customer choice has engaged in anticompetitive behavior by
not providing other retail electric providers with nondiscriminatory
terms and conditions of access to distribution facilities or
customers within the electric cooperative's certificated service area
that are comparable to the electric cooperative's and its
subsidiaries' terms and conditions of access to distribution
facilities or customers, the commission shall notify the electric
cooperative.
(b) The electric cooperative shall have three months to cure
the anticompetitive or noncompliant behavior described in Subsection
(a). If the behavior is not fully remedied within that time, the
commission may prohibit the electric cooperative or its subsidiary
from providing retail service outside its certificated retail service
area until the behavior is remedied.

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Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 41.057. BILLING. (a) An electric cooperative that opts

for customer choice may continue to bill directly electric customers
located in its certificated service area for all transmission and
distribution services. The electric cooperative may also bill
directly for generation and customer services provided by the
electric cooperative or its subsidiaries to those customers.
(b) A customer served by an electric cooperative for
transmission and distribution services and by a retail electric
provider for retail service has the option of being billed directly
by each service provider or receiving a single bill for distribution,
transmission, and generation services from the electric cooperative.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 41.058. TARIFFS FOR OPEN ACCESS. An electric cooperative

that owns or operates transmission and distribution facilities shall
file tariffs implementing the open access rules established by the
commission under Section 39.203 with the appropriate regulatory
authorities having jurisdiction over the transmission and
distribution service of the electric cooperative before the 90th day
preceding the date the electric cooperative offers customer choice.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 41.059. NO POWER TO AMEND CERTIFICATES. Nothing in this

chapter empowers a board of directors to issue, amend, or rescind a
certificate of public convenience and necessity granted by the
commission.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 41.060. CUSTOMER SERVICE INFORMATION. (a) The commission

shall keep information submitted by customers and retail electric
providers pertaining to the provision of electric service by electric
cooperatives.

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(b) The commission shall notify the appropriate electric

cooperative of information submitted by a customer or retail electric
provider, and the electric cooperative shall respond to the customer
or retail electric provider. The electric cooperative shall notify
the commission of its response.
(c) The commission shall prepare a report for the Sunset
Advisory Commission that includes information submitted and responses
by electric cooperatives in accordance with the Sunset Advisory
Commission's schedule for reviewing the commission.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 41.061. RETAIL RATE CHANGES BY ELECTRIC COOPERATIVES. (a)

This section shall apply to retail rates of an electric cooperative
that has not adopted customer choice and to the retail delivery rates
of an electric cooperative that has adopted customer choice. This
section may not apply to rates for:
(1) sales of electric energy by an electric cooperative
that has adopted customer choice; or
(2) wholesale sales of electric energy.
(b) An electric cooperative may change its rates by:
(1) adopting a resolution approving the proposed change;
(2) mailing notice of the proposed change to each affected
customer whose rate would be increased by the proposed change at
least 30 days before implementation of the proposed change, which
notice may be included in a monthly billing; and
(3) holding a meeting to discuss the proposed rate changes
with affected customers, if any change is expected to increase total
system annual revenues by more than $100,000 or one percent,
whichever is greater.
(c) An electric cooperative may implement the proposed rates on
completion of the requirements under Subsection (b), and those rates
shall remain in effect until changed by the electric cooperative as
provided by this section or, for rates other than retail delivery
rates, until this section is no longer applicable because the
electric cooperative adopts customer choice.
(d) The electric cooperative may reconsider a rate change at
any time and adjust the rate by board resolution without additional
notice or meeting of customers if the rate as adjusted is not

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expected to increase the revenues from a customer class. However, if

notice is given to a customer class that would receive an increase as
a result of the adjustment, then the rates for the customer class may
be increased without additional meeting of the customers. A customer
may petition to appeal within the time provided in Subsection (f).
(e) Retail rates set by an electric cooperative that has not
adopted customer choice and retail delivery rates set by an electric
cooperative that has adopted customer choice shall be just and
reasonable, not unreasonably preferential, prejudicial, or
discriminatory; provided, however, if the customer agrees, an
electric cooperative may charge a market-based rate to customers who
have energy supply options if rates are not increased for other
customers as a result.
(f) A customer of the electric cooperative who is adversely
affected by a rate setting resolution of the electric cooperative is
entitled to judicial review. A person initiates judicial review by
filing a petition in the district court of Travis County not later
than the 90th day after the resolution is implemented.
(g) The resolution of the electric cooperative setting rates,
as it may have been amended as described in Subsection (d), shall be
presumed valid, and the burden of showing that the resolution is
invalid rests on the persons challenging the resolution. A court
reviewing a change of a rate or rates by an electric cooperative may
consider any relevant factor including the cost of providing service.
(h) If the court finds that the electric cooperative's
resolution setting rates violates the standards contained in
Subsection (e), or that the electric cooperative's rate violates
Subsection (e), the court shall enter an order:
(1) stating the specific basis for its determination that
the rates set in the electric cooperative's resolution violate
Subsection (e); and
(2) directing the electric cooperative to:
(A) set, within 60 days, revised retail rates that do
not violate the standards of Subsection (e); and
(B) refund or credit against future bills, at the
electric cooperative's option, revenues collected under the rate
found to violate the standards of Subsection (e) that exceed the
revenues that would have been collected under the revised rates. The
refund or credit shall be made over a period of not more than 12
months, as determined by the court.

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(i) The court may not enter an order delaying or prohibiting

implementation of a rate change or set revised rates either for the
period the challenged resolution was in effect or prospectively.
(j) A person having obtained an order of the court requiring an
electric cooperative to set revised retail rates pursuant to
Subsection (h)(2)(A) may, once the order is no longer subject to
appeal, initiate an original proceeding in the district court of
Travis County either to:
(1) seek enforcement of the court's order by writ of
mandamus if the electric cooperative has failed to adopt a resolution
approving revised rates within the time prescribed; or
(2) seek judicial review of the electric cooperative's most
current resolution setting rates as provided in this section, if the
electric cooperative has set revised rates pursuant to the order of
the court within the time prescribed. In the event of such
enforcement proceeding or judicial review the court may, in addition
to the other remedies provided for in this section, award reasonable
costs, including reasonable attorney's fees, to the party prevailing
on the case as a whole. Additionally, if the court finds that either
party has acted in bad faith solely for the purpose of perpetuating
the rate dispute between the parties, the court may impose sanctions
on the offending party in accordance with the provisions of
Subsections (b), (c), and (e), Section 10.004, Civil Practice and
Remedies Code.
(k) An electric cooperative that has not adopted customer
choice and that has not changed each of its nonresidential rates
since January 1, 1999, shall, on or before May 1, 2002, adopt a
resolution setting rates. The resolution shall be subject to
judicial review as provided in this section whether or not any rate
is changed. In the event the electric cooperative fails to adopt a
resolution setting rates pursuant to this subsection, a customer may
petition for judicial review of the electric cooperative's rates. A
person initiates judicial review by filing a petition in the district
court of Travis County not later than November 1, 2002.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 41.062. ALLOCATION OF STRANDED INVESTMENT. Any

competition transition charge shall be allocated among retail

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customer classes based on the relevant customer class characteristics

as of the end of the electric cooperative's most recent fiscal year
before implementation of customer choice, in accordance with the
methodology used to allocate the costs of the underlying assets or
expenses in the electric cooperative's most recent cost of service
study certified by a professional engineer or certified public
accountant or approved by the commission. In multiply certificated
areas, a retail customer may not avoid stranded cost recovery charges
by switching to another electric cooperative, an electric utility, or
a municipally owned utility.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

SUBCHAPTER C. RIGHTS NOT AFFECTED

Sec. 41.101. INTERFERENCE WITH CONTRACT. (a) This subtitle
may not interfere with or abrogate the rights or obligations of
parties, including a retail or wholesale customer, to a contract with
an electric cooperative or its subsidiary.
(b) No provision of this subtitle may interfere with or be
deemed to abrogate the rights or obligations of a party under a
contract or an agreement concerning certificated service areas.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 41.102. ACCESS TO WHOLESALE MARKET. Nothing in this

subtitle shall limit the access of an electric cooperative or its
subsidiary, either on its own behalf or on behalf of its customers,
to the wholesale electric market.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 41.103. PROTECTION OF BONDHOLDERS. Nothing in this

subtitle or any rule adopted under this subtitle shall impair
contracts, covenants, or obligations between an electric cooperative
and its lenders and holders of bonds issued on behalf of or by the
electric cooperative.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

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Sec. 41.104. TAX-EXEMPT STATUS. Nothing in this subtitle may

impair the tax-exempt status of electric cooperatives, nor shall
anything in this subtitle compel any electric cooperative to use its
facilities in a manner that violates any contractual provisions, bond
covenants, or other restrictions applicable to facilities financed by
tax-exempt or federally insured or guaranteed debt.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

SUBCHAPTER D. MARKET PARTICIPATION AND SECURITIZATION

Sec. 41.151. PURPOSE. (a) The purpose of this subchapter is
to enable electric cooperatives to use securitization financing to
recover extraordinary costs and expenses incurred due to the abnormal
weather events that occurred in this state in the period beginning
12:00 a.m., February 12, 2021, and ending at 11:59 p.m., February 20,
2021. This type of debt will reduce the cost of financing the
extraordinary costs and expenses relative to the costs that would be
incurred using conventional electric cooperative financing methods.
The proceeds of the securitized bonds shall be used solely for the
purposes of financing or refinancing the extraordinary costs and
expenses, including costs relating to consummation and administration
of the securitized financing. The board of each electric cooperative
involved in the financing shall ensure that securitization provides
tangible and quantifiable benefits to its members, greater than would
have been achieved absent the issuance of securitized bonds. Each
board that chooses to securitize under this subchapter shall ensure
that the structuring and pricing of the securitized bonds are
consistent with market conditions and the terms of the financing
order. This subchapter may be used by a group of electric
cooperatives to issue securitized bonds in a combined securitization
transaction.
(b) A cooperative that owes the independent organization
certified under Section 39.151, Utilities Code, for the ERCOT power
region amounts incurred as a result of operations during the period
beginning 12:01 a.m., February 12, 2021, and ending at 11:59 p.m.,
February 20, 2021, shall:
(1) use all means necessary to securitize the amount owed

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the independent organization, calculated solely according to the

protocols of the independent organization in effect during the period
of emergency promulgated subject to the approval of the commission;
and
(2) fully repay the amount described by Subdivision (1)
immediately upon receipt of the securitized amount along with any
additional amounts necessary to fully satisfy the amount owed.

Added by Acts 2021, 87th Leg., R.S., Ch. 950 (S.B. 1580), Sec. 1, eff.
June 18, 2021.

Sec. 41.152. DEFINITIONS. In this subchapter:

(1) "Assignee" means any individual, corporation, or other
legally recognized entity, including a special purpose entity, to
which an interest in securitized property is transferred, other than
as security.
(2) "Board" means the governing body of an electric
cooperative.
(3) "Combined securitization transaction" means the
issuance of securitized bonds under this subchapter in a transaction
involving at least two electric cooperatives acting together.
(4) "Extraordinary costs and expenses" means:
(A) costs and expenses incurred by an electric
cooperative for electric power and energy purchased during the period
of emergency in excess of what would have been paid for the same
amount of electric power and energy at the average rate incurred by
the electric cooperative for electric power and energy purchased
during the month of January 2021;
(B) costs and expenses incurred by an electric
cooperative to generate and transmit electric power and energy during
the period of emergency, including fuel costs, operation and
maintenance expenses, overtime costs, and all other costs and
expenses that would not have been incurred but for the abnormal
weather events; and
(C) any charges imposed on the electric cooperative or
on a power supplier to the electric cooperative that were passed on
to the electric cooperative by the applicable regional transmission
organization or independent system operator, resulting from defaults
by other market participants of the regional transmission

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organization or independent system operator for costs relating to the

period of emergency.
(5) "Financing order" means an order of a board approving
the issuance of securitized bonds, which may be through participation
in a combined securitization transaction, and the creation of
securitized charges for the recovery of qualified costs.
(6) "Financing party" means a holder of securitized bonds,
including trustees, collateral agents, and other persons acting for
the benefit of the holder.
(7) "Qualified costs" means up to 100 percent of an
electric cooperative's:
(A) extraordinary costs and expenses;
(B) costs of issuing, supporting, repaying, servicing,
and refinancing the securitized bonds, whether incurred or paid upon
issuance of the securitized bonds or over the life of the securitized
bonds or the refunded securitized bonds, whether incurred directly or
allocated in a combined securitization transaction; and
(C) any costs of retiring and refunding the electric
cooperative's existing debt securities initially issued to finance
the extraordinary costs and expenses including interest accrued on
debt securities over their term, whether incurred directly or
allocated in a combined securitization transaction.
(8) "Period of emergency" means the period beginning 12:00
a.m., February 12, 2021, and ending 11:59 p.m., February 20, 2021.
(9) "Securitized bonds" means bonds, debentures, notes,
certificates of participation or of beneficial interest, or other
evidences of indebtedness or ownership that are issued by an electric
cooperative, its successors, or an assignee of the electric
cooperative or group of electric cooperatives under a financing order
or financing orders, that have a term not longer than 30 years, and
that are secured by or payable, primarily, from securitized property
and the proceeds thereof and, in a combined securitization
transaction, securitized property contributed by other electric
cooperatives. If certificates of participation, beneficial interest,
or ownership are issued, references in this subchapter to principal,
interest, or premium shall refer to comparable amounts under those
certificates.
(10) "Securitized charges" means nonbypassable amounts to
be charged for the use or availability of electric services, approved
by the board under a financing order to recover qualified costs, that

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shall be collected by an electric cooperative, its successors, an

assignee, or other collection agents as provided for in the financing
order.
(11) "Securitized property" means the property right
created under this subchapter, including the right, title, and
interest of the electric cooperative or its assignee:
(A) in and to the securitized charges established under
a financing order, including all rights to obtain adjustments in
accordance with Section 41.157 and the financing order;
(B) to be paid the amount that is determined in a
financing order to be the amount that the electric cooperative or its
transferee is lawfully entitled to receive under this subchapter and
the proceeds thereof; and
(C) in and to all revenue, collections, claims,
payments, money, or process of or arising from the securitized
charges that are the subject of a financing order.

Added by Acts 2021, 87th Leg., R.S., Ch. 950 (S.B. 1580), Sec. 1, eff.
June 18, 2021.

Sec. 41.153. FINANCING ORDERS; TERMS. (a) The board shall

adopt a financing order to recover the electric cooperative's
qualified costs consistent with the standards in Section 41.151.
(b) The financing order shall detail the amount of qualified
costs to be recovered and the period over which the nonbypassable
securitized charges shall be recovered, which period may not exceed
30 years.
(c) Securitized charges shall be collected and allocated among
customers in the manner provided by the financing order.
(d) A financing order becomes effective in accordance with its
terms, and the financing order, together with the securitized charges
authorized in the order, after it takes effect, is irrevocable and
not subject to denial, recission, reduction, impairment, adjustment,
or other alteration by further action of the board or by action of
any regulatory or other governmental body of this state, except as
permitted by Section 41.157. A financing order issued under this
subchapter has the same force and effect of a financing order issued
under Chapter 39.
(e) A financing order may be reviewed by appeal by a member of

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the electric cooperative to a district court in the county where the

electric cooperative is domiciled, filed not later than the 15th day
after the date the financing order is adopted by the board. The
judgment of the district court may be reviewed only by direct appeal
to the Supreme Court of Texas filed not later than the 15th day after
the date of the entry of judgment. All appeals shall be heard and
determined by the district court and the Supreme Court of Texas as
expeditiously as possible with lawful precedence over other matters.
Review on appeal shall be based solely on the financing order adopted
by the board, other information considered by the board in adopting
the resolutions, and briefs to the court and shall be limited to
whether the financing order conforms to the constitution and laws of
this state and the United States and is within the authority of the
board under this subchapter.
(f) The board or, in a combined securitization transaction, the
boards of all participating electric cooperatives, may adopt a
financing order or financing orders providing for retiring and
refunding securitized bonds on making a finding that the future
securitized charges required to service the new securitized bonds,
including transaction costs, will be less than the future securitized
charges required to service the securitized bonds being refunded.
After the indefeasible repayment in full of all outstanding
securitized bonds and associated financing costs, the board shall
adjust the related securitized charges accordingly.

Added by Acts 2021, 87th Leg., R.S., Ch. 950 (S.B. 1580), Sec. 1, eff.
June 18, 2021.

Sec. 41.154. PROPERTY RIGHTS. (a) The rights and interests of

an electric cooperative or its subsidiary, affiliate, successor,
financing party, or assignee under a financing order, including the
right to impose, collect, receive, and enforce the payment of
securitized charges authorized in the financing order, shall be only
contract rights until the property is first transferred or pledged to
an assignee or financing party, as applicable, in connection with the
issuance of securitized bonds, at which time the property becomes
securitized property.
(b) Securitized property that is specified in the financing
order constitutes a present vested property right for all purposes,

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including for purposes of Sections 16 and 17, Article I, Texas

Constitution, Section 10, Article I, United States Constitution, and
the Fifth Amendment to the United States Constitution, and the laws
of this state and the United States, even if the imposition and
collection of securitized charges depend on further acts of the
electric cooperative or others that may not have yet occurred.
(c) Securitized property shall exist regardless of whether
securitized charges have been billed, have accrued, or have been
collected and notwithstanding the fact that the value or amount of
the property is dependent on the future provision of service to
customers by the electric cooperative or its successors or assigns.
(d) On the issuance of the securitized bonds and the financing
order, and when the requirements of Section 41.159 are met, the
securitized charges, including their nonbypassability, are
irrevocable, final, nondiscretionary, and effective without further
action by the electric cooperative or any other person or
governmental authority. The financing order shall remain in effect
and the property shall continue to exist for the same period as the
pledge of the state described in Section 41.160.
(e) All revenue, collections, claims, payments, money, or
proceeds of or arising from or relating to securitized charges shall
constitute proceeds of the securitized property arising from the
financing order.

Added by Acts 2021, 87th Leg., R.S., Ch. 950 (S.B. 1580), Sec. 1, eff.
June 18, 2021.

Sec. 41.155. NO SETOFF. The interest of an assignee or pledgee

in securitized property and in the revenues and collections arising
from that property are not subject to setoff, counterclaim,
surcharge, recoupment, or defense by the electric cooperative or any
other person or in connection with the bankruptcy of the electric
cooperative or any other entity. A financing order shall remain in
effect and unabated notwithstanding the bankruptcy of the electric
cooperative, its successors, or assignees.

Added by Acts 2021, 87th Leg., R.S., Ch. 950 (S.B. 1580), Sec. 1, eff.
June 18, 2021.

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Sec. 41.156. NO BYPASS. (a) A financing order shall include

terms ensuring that the imposition and collection of securitized
charges authorized in the order shall be nonbypassable and apply to
all customers connected to the electric cooperative's system assets
and taking service, regardless of whether the system assets continue
to be owned by the electric cooperative.
(b) The electric cooperative, its servicer, any entity
providing electric transmission or distribution services, and any
retail electric provider providing services to a retail customer in
the electric cooperative's certificated service area as it existed on
the date of enactment of this subchapter are entitled to collect and
must remit, consistent with this subchapter and any financing order
adopted under this subchapter, the securitized charges from the
retail customers and from retail customers that switch to new on-site
generation. Such retail customers are required to pay the
securitized charges.

Added by Acts 2021, 87th Leg., R.S., Ch. 950 (S.B. 1580), Sec. 1, eff.
June 18, 2021.

Sec. 41.157. TRUE-UP. (a) A financing order shall be reviewed

and adjusted promptly if after its adoption there are additional
charges, reductions, or refunds of extraordinary costs and expenses,
to:
(1) ensure that there is not an over-collection or an
under-collection of extraordinary costs and expenses; and
(2) ensure that collections on the securitized property
will be sufficient to timely make all periodic and final payments of
principal, interest, fees, and other amounts and to timely fund all
reserve accounts, if any, related to the securitized bonds.
(b) A financing order shall also include a mechanism requiring
that securitized charges be reviewed by the board and adjusted at
least annually, not later than the 45th day after the anniversary
date of the issuance of the securitized bonds, to:
(1) correct over-collections or under-collections of the
preceding 12 months; and
(2) ensure the expected recovery of amounts sufficient to
timely provide all payments of debt service and other required
amounts and charges in connection with the securitized bonds.

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(c) The electric cooperatives that are members of a generation

and transmission cooperative may include in their financing orders
the ability to allocate any true-up amounts over the retail customers
of all electric cooperatives that are members of the same generation
and transmission cooperative.
(d) In a combined securitization transaction, each generation
and transmission cooperative may calculate all adjustments and
determinations relevant to each true-up by each electric cooperative
member of the generation and transmission cooperative participating
in the securitization transaction, with the adjustments being
allocated across the electric cooperatives in the manner agreed to by
all of the participating electric cooperatives under their financing
orders.
(e) A governmental authority may not disapprove of or alter any
adjustments made or proposed to be made under this subchapter other
than to correct computation or other manifest errors.

Added by Acts 2021, 87th Leg., R.S., Ch. 950 (S.B. 1580), Sec. 1, eff.
June 18, 2021.

Sec. 41.158. TRUE SALE. An agreement by an electric

cooperative or assignee to transfer securitized property that
expressly states that the transfer is a sale or other absolute
transfer signifies that the transaction is a true sale and is not a
secured transaction and that title, legal and equitable, has passed
to the entity to which the securitized property is transferred. The
transaction shall be treated as an absolute sale regardless of
whether the purchaser has any recourse against the seller, or any
other term of the parties' agreement, including the seller's
retention of an equity interest in the securitized property, the fact
that the electric cooperative acts as the collector of securitized
charges relating to the securitized property, or the treatment of the
transfer as a financing for tax, financial reporting, or other
purposes.

Added by Acts 2021, 87th Leg., R.S., Ch. 950 (S.B. 1580), Sec. 1, eff.
June 18, 2021.

Sec. 41.159. SECURITY INTERESTS; ASSIGNMENT; COMMINGLING;

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DEFAULT. (a) Securitized property does not constitute an account or

general intangible under Section 9.106, Business & Commerce Code.
The transfer, sale, or assignment, or the creation, granting,
perfection, and enforcement of liens and security interests in
securitized property are governed by this section and not by the
Business & Commerce Code. Securitized property shall constitute
property for all purposes, including for contracts securing
securitized bonds, regardless of whether the securitized property
revenues and proceeds have accrued.
(b) A valid and enforceable transfer, sale, or assignment, or
lien and security interest, as applicable, in securitized property
may be created only by a financing order and the execution and
delivery of a transfer, sale, or assignment, or security agreement,
as applicable, with a financing party in connection with the issuance
of securitized bonds. The transfer, sale, assignment, or lien and
security interest, as applicable, shall attach automatically from the
time that value is received for the securitized bonds and, on
perfection through the filing of notice with the secretary of state
in accordance with the rules prescribed under Subsection (d), shall
be a continuously perfected transfer, sale, and assignment, or lien
and security interest, as applicable, in the securitized property and
all proceeds of the property, whether accrued or not, shall have
priority in the order of filing and take precedence over any
subsequent judicial or other lien creditor. If notice is filed
before the 10th day after the date value is received for the
securitized bonds, the transfer, sale, or assignment, or security
interest, as applicable, shall be perfected retroactive to the date
value was received. Otherwise, the transfer, sale, or assignment, or
security interest, as applicable, shall be perfected as of the date
of filing.
(c) Transfer, sale, or assignment of an interest in securitized
property to an assignee shall be perfected against all third parties,
including subsequent judicial or other lien creditors, when the
financing order becomes effective, transfer documents have been
delivered to the assignee, and a notice of that transfer has been
filed in accordance with the rules prescribed under Subsection (d).
However, if notice of the transfer has not been filed in accordance
with this subsection before the 10th day after the delivery of
transfer documentation, the transfer of the interest is not perfected
against third parties until the notice is filed.

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(d) The secretary of state shall implement this section by

establishing and maintaining a separate system of records for the
filing of notices under this section and prescribing the rules for
those filings based on Chapter 9, Business & Commerce Code, adapted
to this subchapter and using the terms defined in this subchapter.
(e) The priority of a lien and security interest perfected
under this section is not impaired by any later modification of the
financing order under Section 41.157 or by the commingling of funds
arising from securitized charges with other funds, and any other
security interest that may apply to those funds shall be terminated
when they are transferred to a segregated account for the assignee or
a financing party. If securitized property has been transferred to
an assignee, any proceeds of that property shall be held in trust for
the assignee.
(f) Securitized bonds shall be secured by a statutory lien on
the securitized property in favor of the owners or beneficial owners
of securitized bonds. The lien shall automatically arise on issuance
of the securitized bonds without the need for any action or
authorization by the electric cooperative or the board. The lien
shall be valid and binding from the time the securitized bonds are
executed and delivered. The securitized property shall be
immediately subject to the lien, and the lien shall immediately
attach to the securitized property and be effective, binding, and
enforceable against the electric cooperative, its creditors, their
successors, assignees, and all others asserting rights therein,
regardless of whether those persons have notice of the lien and
without the need for any physical delivery, recordation, filing, or
further act. The lien is created by this subchapter and not by any
security agreement, but may be enforced by any financing party or
their representatives as if they were secured parties under Chapter
9, Business & Commerce Code. On application by or on behalf of the
financing parties, a district court in the county where the electric
cooperative is domiciled may order that amounts arising from
securitized charges be transferred to a separate account for the
financing parties' benefit.
(g) The statutory lien is a continuously perfected security
interest and has priority over any other lien, created by operation
of law or otherwise, that may subsequently attach to that securitized
property or proceeds thereof unless the owners or beneficial owners
of securitized bonds as specified in the trust agreement or indenture

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have agreed in writing otherwise. The statutory lien is a lien on

the securitized charges and all securitized charge revenues or other
proceeds that are deposited in any deposit account or other account
of the servicer or other person in which securitized charge revenues
or other proceeds have been commingled with other funds.
(h) The statutory lien is not adversely affected or impaired
by, among other things, the commingling of securitized charge
revenues or other proceeds from securitized charges with other
amounts regardless of the person holding those amounts.
(i) The electric cooperative, any successor or assignee of the
electric cooperative, or any other person with any operational
control of any portion of the electric cooperative's system assets,
whether as owner, lessee, franchisee, or otherwise, and any successor
servicer of collections of the securitized charges shall be bound by
the requirements of this subchapter and shall perform and satisfy all
obligations imposed under this subchapter in the same manner and to
the same extent as did its predecessor, including the obligation to
bill, adjust, and enforce the payment of securitized charges.
(j) If a default or termination occurs under the securitized
bonds, the financing parties or their representatives may foreclose
on or otherwise enforce their lien and security interest in any
securitized property as if they were secured parties under Chapter 9,
Business & Commerce Code, and on application by the electric
cooperative or by or on behalf of the financing parties, a district
court in the county where the electric cooperative is domiciled may
order that amounts arising from securitized charges be transferred to
a separate account for the financing parties' benefit, to which their
lien and security interest shall apply. On application by or on
behalf of the financing parties, a district court in the county where
the electric cooperative is domiciled shall order the sequestration
and payment to them of revenues arising from the securitized charges.

Added by Acts 2021, 87th Leg., R.S., Ch. 950 (S.B. 1580), Sec. 1, eff.
June 18, 2021.

Sec. 41.160. PLEDGE OF STATE. Securitized bonds are not a debt

or obligation of the state and are not a charge on its full faith and
credit or taxing power. The state pledges, however, for the benefit
and protection of assignees, financing parties, and the electric

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cooperative, that it will not take or permit, or permit any agency or

other governmental authority or political subdivision of the state to
take or permit, any action that would impair the value of securitized
property, or, except as permitted by Section 41.157, reduce, alter,
or impair the securitized charges to be imposed, collected, and
remitted to financing parties, until the principal, interest and
premium, and any other charges incurred and contracts to be performed
in connection with the related securitized bonds have been paid and
performed in full. Any party issuing securitized bonds is authorized
to include this pledge in any documentation relating to those bonds.

Added by Acts 2021, 87th Leg., R.S., Ch. 950 (S.B. 1580), Sec. 1, eff.
June 18, 2021.

Sec. 41.161. TAX EXEMPTION. Transactions involving the

transfer and ownership of securitized property and the receipt of
securitized charges are exempt from state and local income, sales,
franchise, gross receipts, and other taxes or similar charges.

Added by Acts 2021, 87th Leg., R.S., Ch. 950 (S.B. 1580), Sec. 1, eff.
June 18, 2021.

Sec. 41.162. NOT PUBLIC UTILITY. An assignee or financing

party may not be considered to be a public utility, electric
cooperative, or person providing electric service solely by virtue of
the transactions described in this subchapter.

Added by Acts 2021, 87th Leg., R.S., Ch. 950 (S.B. 1580), Sec. 1, eff.
June 18, 2021.

Sec. 41.163. SEVERABILITY. Effective on the date the first

securitized bonds are issued under this subchapter, if any provision
in this title or portion of this title is held to be invalid or is
invalidated, superseded, replaced, repealed, or expires for any
reason, that occurrence does not affect the validity or continuation
of this subchapter or any other provision of this title that is
relevant to the issuance, administration, payment, retirement, or
refunding of securitized bonds or to any actions of the electric

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cooperative, its successors, an assignee, a collection agent, or a

financing party, which shall remain in full force and effect.

Added by Acts 2021, 87th Leg., R.S., Ch. 950 (S.B. 1580), Sec. 1, eff.
June 18, 2021.

CHAPTER 42. PUBLIC CHARGING OF ELECTRIC VEHICLES

Sec. 42.0101. LEGISLATIVE FINDINGS. (a) The legislature finds
that it is in the best interests of this state to continue the long-
standing policy of supporting private sector investment in
infrastructure by establishing a framework designed to encourage
competitive private sector investment in the deployment of public
electric vehicle charging stations.
(b) The legislature finds that encouraging investment in the
deployment of public electric vehicle charging stations is essential
to foster the rapid installation and widespread use of public
electric vehicle charging stations on property whose owners or
tenants desire to install public electric vehicle charging stations.
(c) The legislature finds that electric utilities, transmission
and distribution utilities, competitive entities, and the commission
have important roles to fill in supporting the installation and use
of infrastructure for electric vehicle charging.
(d) The legislature finds that it is necessary to:
(1) implement competitively neutral policies to encourage
competitive private sector investment in public electric vehicle
charging station deployment;
(2) develop and implement competitively neutral electricity
tariffs that are optimized for public electric vehicle charging
stations and based on cost causation principles while ensuring
transparency in pricing and recognizing changing market needs; and
(3) encourage competitive private investment, ownership,
and operation of public electric vehicle charging stations, including
equipment that allows for fast charging.

Added by Acts 2023, 88th Leg., R.S., Ch. 53 (S.B. 1002), Sec. 1, eff.
September 1, 2023.

Sec. 42.0102. DEFINITIONS. In this chapter:

(1) "Direct-current fast charging station" means a charging

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system capable of delivering at least 50 kilowatts of direct-current

electrical power to an electric vehicle's rechargeable battery at a
voltage of 200 volts or greater.
(2) "Electric vehicle" means a vehicle that is propelled by
one or more electric motors using energy stored in the form of a
rechargeable battery.
(3) "Electric vehicle charging provider" means the owner or
operator of a public electric vehicle charging station. The term
does not include an electric utility or transmission and distribution
utility.
(4) "Electric vehicle charging service" means sales made
from a public electric vehicle charging station to the public.
(5) "Level two charging station" means a charging system
capable of delivering at least 3 and not more than 19.2 kilowatts of
alternating-current electrical power to an electric vehicle's
rechargeable battery at a voltage of at least 208 volts on a circuit
of at least 40 amperes.
(6) "Make-ready infrastructure" means the electrical
infrastructure required to service a public electric vehicle charging
station's electrical load on the electric utility's or transmission
and distribution utility's side of the point of delivery. The term:
(A) includes all site-specific electrical
infrastructure required to accommodate engineering, physical,
operational, or other constraints for the public electric vehicle
charging station, regardless of whether the infrastructure is on the
utility's or customer's side of the point of delivery; and
(B) does not include the public electric vehicle
charging station or any utility infrastructure on the customer's side
of the point of delivery, up to and including the meter.
(7) "Public electric vehicle charging station" means any
level two charging station or direct-current fast charging station
that delivers electricity from a source outside an electric vehicle
into an electric vehicle, is separate and distinct from make-ready
infrastructure, and is accessible for commercial use by the public,
or similar vehicle charging equipment capable of delivering
electricity into an electric vehicle faster than a level two charging
station. The term does not include vehicle charging equipment that
is:
(A) used by an electric utility, a transmission and
distribution utility, or an affiliate to charge:

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(i) an electric vehicle owned by the utility or

affiliate; or
(ii) as an incident of employment, an electric
vehicle owned by an employee of the utility or affiliate; or
(B) located on the premises of a customer of an
electric utility, a transmission and distribution utility, or an
affiliate and:
(i) used by the customer or the customer's tenants,
affiliates, or guests; and
(ii) not used commercially for electric vehicle
charging service.

Added by Acts 2023, 88th Leg., R.S., Ch. 53 (S.B. 1002), Sec. 1, eff.
September 1, 2023.

Sec. 42.0103. PUBLIC CHARGING OF ELECTRIC VEHICLES OUTSIDE OF

ERCOT. (a) This section applies only to an electric utility that
operates solely outside of ERCOT.
(b) An electric utility:
(1) may not provide electric vehicle charging service
directly to a customer except as provided by this section;
(2) may be affiliated with an entity that provides electric
vehicle charging service from a public electric vehicle charging
station if the affiliate:
(A) is not subject to regulation by the commission; and
(B) is subject to prohibitions on market power abuse,
cross-subsidizations, co-branding, and preferential treatment between
regulated and competitive activities described by Section 39.157(d);
and
(3) consistent with the requirements of Subchapter B,
Chapter 38, and Section 39.157(d)(3), shall offer the same
nondiscriminatory rates, terms, and conditions offered to an
affiliate described by Subdivision (2) to other electric vehicle
charging providers in the utility's service area for the operation of
public electric vehicle charging stations.
(c) An affiliate of an electric utility that provides electric
vehicle charging service and is not subject to regulation by the
commission is subject to the same tariffs of the electric utility
that apply to any other entity receiving from the utility electric

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service that is used to provide electric vehicle charging service.

(d) This section does not prohibit an electric utility from
subsidizing the costs of make-ready infrastructure through rates or
charges for services provided by the electric utility's regulated
services.
(e) An electric utility may provide electric vehicle charging
service directly to a customer only if:
(1) the public electric vehicle charging station used to
provide electric vehicle charging service is constructed in
compliance with the requirements of this section; and
(2) the rates charged by the utility for electric vehicle
charging service are set by the commission under Subsection (m).
(f) An electric utility seeking to provide electric vehicle
charging service directly to a customer shall:
(1) file with the commission a proposal identifying the
specific location at which the utility seeks to provide electric
vehicle charging service and a general description of the public
electric vehicle charging station the utility proposes to construct
at the location; and
(2) provide notice of the filing made under Subdivision
(1):
(A) on the utility's Internet website; and
(B) to each dealer to which Chapter 2310, Occupations
Code, applies who offers for retail sale motor fuel at a site that is
located not more than 15 miles from the proposed location of the
public electric vehicle charging station.
(g) A notice provided under Subsection (f)(2) must include:
(1) the date the electric utility filed a proposal to
provide electric vehicle charging service under Subsection (f)(1);
and
(2) the date by which a person may file a proposal to
provide reasonably comparable electric vehicle charging service under
Subsection (h).
(h) The commission shall determine whether the provision of
electric vehicle charging service under a proposal submitted under
Subsection (f)(1) is in the public interest because the service is
adequate for the needs of the area. Not later than the 90th day
after the date the commission determines that the provision of the
proposed electric vehicle charging service is in the public interest,
a person other than the electric utility may notify the commission

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that:
(1)
the person:
(A) intends to provide electric vehicle charging
service that is adequate for the needs of the area in reasonable
proximity to the proposed location of the public electric vehicle
charging station and request the necessary make-ready infrastructure
from the electric utility; and
(B) is firmly committed to placing into service
equipment necessary to provide the electric vehicle charging service
before the later of:
(i) 18 months after the date the person submits the
notice to the commission; or
(ii) the date of completion of the installation of
the necessary make-ready infrastructure to provide the electric
vehicle charging service; and
(2) the person is capable of:
(A) acquiring the right to use the property at which
the electric vehicle charging service will be provided; and
(B) financing the cost of the equipment described by
Subdivision (1)(B).
(i) The commission shall issue a determination regarding each
notice received under Subsection (h) of whether:
(1) the proposed electric vehicle charging service is
adequate for the needs of the area; and
(2) the person has made the commitment and has the
capabilities described by that subsection.
(j) The commission by rule may establish a distance that
constitutes reasonable proximity to a type of location for the
purposes of Subsection (h). The commission may also issue an order
establishing a distance other than one authorized by rule that
constitutes reasonable proximity to a location for purposes of
Subsection (h) for a specific electric utility. In establishing
distances that constitute reasonable proximity to a location, the
commission shall:
(1) consider population density and site access;
(2) establish the reasonable proximity between two
locations on an interstate highway for the purposes of Subsection (h)
as not more than 10 miles; and
(3) consider the Texas Department of Transportation's
designation by category of nearby roads other than interstate

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highways when establishing the reasonable proximity between two

locations at which electric vehicle charging service will be provided
on roads other than interstate highways.
(k) An electric utility that files a proposal under Subsection
(f) may proceed with construction of the public electric vehicle
charging station and the provision of electric vehicle charging
service unless the commission determines, based on the information
submitted under Subsection (h), that:
(1) the electric vehicle charging service proposed under
Subsection (h) in response to the utility's proposal is adequate for
the needs of the area and that the person who submitted the notice
under Subsection (h) has made the commitment and has the capabilities
described by that subsection; or
(2) the electric vehicle charging service proposed under
Subsection (f) by the utility unreasonably duplicates:
(A) electric vehicle charging service provided by
another person; or
(B) a facility under construction that another person
will use to provide electric vehicle charging service.
(l) An electric utility authorized to proceed with the
construction of a public electric vehicle charging station under
Subsection (k) shall notify the commission that the utility intends
to proceed with the construction and may construct and operate the
proposed public electric vehicle charging station after the 120th day
after the date the utility files the notice of intent under this
subsection.
(m) On application by an electric utility, the commission shall
set in a manner authorized under Chapter 36 the rates the utility may
charge for electric vehicle charging service. The rates must be
reasonable and ensure that competition is not impaired. The
commission may set rates differently for different locations and
times of day and for different types of electric vehicle charging
service.
(n) The commission shall permit an electric utility authorized
to construct and operate a public electric vehicle charging station
under this section to recover, using the rate of return on investment
established in the commission's final order in the utility's most
recent base rate proceeding, reasonable and necessary costs incurred
for the construction, financing, operation, and maintenance of that
public electric vehicle charging station.

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(o) This section does not prohibit a person who is not an

electric utility or an affiliate of an electric utility from entering
into an agreement with an electric utility for the utility to own or
operate a public electric vehicle charging station on the person's
property if:
(1) the utility does not:
(A) provide electric vehicle charging service using the
public electric vehicle charging station; or
(B) brand or market the public electric vehicle
charging station as owned or operated by the utility, including by
presenting the utility's name, logo, or any other distinguishing mark
to indicate that the utility owns or operates the public electric
vehicle charging station;
(2) the person solely determines:
(A) physical access to and use of the public electric
vehicle charging station necessary to carry out responsibilities
associated with ownership and operation of the public electric
vehicle charging station; and
(B) prices for the electric vehicle charging service;
and
(3) the person pays for all electric utility-related costs
under a tariff approved by the commission that provides for full
recovery of the costs of the public electric vehicle charging station
from the person, including incremental revenues paid by the person to
the utility associated with the electric vehicle charging service.
(p) The commission shall:
(1) require each electric utility for which the commission
has approved a tariff under Subsection (o) to offer service under the
terms of the tariff to other persons seeking agreements in the
utility's service area on a nondiscriminatory basis; and
(2) ensure that revenue collected by an electric utility
under an agreement under Subsection (o) allows the utility to recover
the costs of owning, constructing, financing, operating, and
maintaining the public electric vehicle charging station from the
person and not the utility's other customers.
(q) A public electric vehicle charging station operated under
an agreement under Subsection (o) is not subject to the requirements
of Subsections (f)-(l).
(r) Notwithstanding any other provision of this section, a
municipality that is a customer of an electric utility may enter into

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an agreement with the utility under which:

(1) the utility owns and operates a public electric vehicle
charging station and provides electric vehicle charging service on
the municipality's property; and
(2) none of the costs of constructing, financing,
operating, or maintaining the public electric vehicle charging
station described by Subdivision (1) are recovered from the other
customers of the utility.

Added by Acts 2023, 88th Leg., R.S., Ch. 53 (S.B. 1002), Sec. 1, eff.
September 1, 2023.

Sec. 42.0104. PUBLIC CHARGING OF ELECTRIC VEHICLES INSIDE

ERCOT. (a) A transmission and distribution utility:
(1) may not directly own, operate, or provide electric
vehicle charging service from a public electric vehicle charging
station;
(2) may not include costs of a public electric vehicle
charging station for recovery through rates approved by the
commission;
(3) may be affiliated with a competitive affiliate that
provides electric vehicle charging service from a public electric
vehicle charging station through a separate entity or third party
only if:
(A) the affiliate:
(i) is not subject to regulation by the commission;
and
(ii) is subject to prohibitions on market power
abuse, cross-subsidizations, co-branding, and preferential treatment
between regulated and competitive activities described by Section
39.157(d); and
(B) the alternative fuels data center map maintained by
the United States Department of Energy does not show that a public
electric vehicle charging station owned or operated by an electric
vehicle charging provider and used to provide electric vehicle
charging service is located less than 50 miles from the location
where the affiliate proposes to provide electric vehicle charging
service; and
(4) consistent with the requirements of Subchapter B,

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Chapter 38, and Section 39.157(d)(3), shall offer the same

nondiscriminatory rates, terms, and conditions offered to the
affiliate described by Subdivision (3) to other electric vehicle
charging providers in the transmission and distribution utility's
service area for the operation of public electric vehicle charging
stations.
(b) An affiliate described by Subsection (a)(3) shall maintain
for at least two years documentation of the alternative fuels data
center map that is available on the date on which the installation of
the public electric vehicle charging station begins.
(c) An affiliate of a transmission and distribution utility
that provides, owns, operates, or maintains public electric vehicle
charging stations and is not subject to regulation by the commission
may not be subsidized by any rate or charge for any regulated
services provided by the transmission and distribution utility.
(d) This section does not prohibit a transmission and
distribution utility from constructing, owning, or operating make-
ready infrastructure on the transmission and distribution utility's
side of the point of delivery that is funded through rates or charges
for services under the transmission and distribution utility's
tariffs.
(e) Notwithstanding Subsection (a), a transmission and
distribution utility may own, operate, lease, install, or otherwise
procure service from a public electric vehicle charging station on
the utility's premises for the sole purpose of serving the utility's
vehicles.
(f) The commission shall permit a transmission and distribution
utility to recover, using the rate of return on investment
established in the commission's final order in the utility's most
recent base rate proceeding, reasonable and necessary costs incurred
for the construction or installation of make-ready infrastructure on
the utility's side of the point of delivery.

Added by Acts 2023, 88th Leg., R.S., Ch. 53 (S.B. 1002), Sec. 1, eff.
September 1, 2023.

CHAPTER 43. PROVISION OF MIDDLE MILE BROADBAND SERVICE BY ELECTRIC

UTILITIES
SUBCHAPTER A. GENERAL PROVISIONS

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Sec. 43.001. LEGISLATIVE FINDINGS. (a) The legislature finds

that access to quality, high-speed broadband Internet service is
important to this state, is a necessary prerequisite for enabling
economic development and improving education, health care, public
safety, and government services in this state, and provides other
benefits to its citizens.
(b) The legislature finds that broadband development in
unserved and underserved areas of Texas can be facilitated by the
participation of electric utilities in this state that own and
operate facilities that may be useful for the full deployment of
broadband service by Internet service providers throughout this
state.
(c) The legislature finds that electric utilities have existing
infrastructure in place throughout this state and that excess fiber
capacity on that infrastructure could be used to provide middle mile
broadband service in unserved and underserved areas.
(d) The legislature finds that it is in the public interest to
encourage the deployment of broadband service in unserved and
underserved areas by permitting electric utilities to own, construct,
or operate fiber facilities for the support of electric service and
to lease excess fiber capacity for the provision of middle mile
broadband service. The purpose of this chapter is to provide the
appropriate framework to facilitate the leasing of excess fiber
capacity on electric utility facilities.
(e) The legislature finds that an electric utility may choose
to implement middle mile broadband service to lease excess fiber
capacity to Internet service providers under the procedures set forth
in this chapter, but is not required to do so. The electric utility
shall have the right to decide, in its sole discretion, whether to
implement middle mile broadband service and may not be penalized for
deciding to implement or not to implement that service.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 2, eff.
September 7, 2005.
Amended by:
Acts 2021, 87th Leg., R.S., Ch. 727 (H.B. 3853), Sec. 1, eff.
June 15, 2021.

Sec. 43.002. APPLICABILITY. (a) This chapter applies to an

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electric utility whether or not the electric utility is offering

customer choice under Chapter 39.
(b) If there is a conflict between the specific provisions of
this chapter and any other provisions of this title, the provisions
of this chapter control.
(c) Except as otherwise provided by this title, no provision of
this title imposes an obligation on an electric utility to construct
or operate facilities to provide middle mile broadband service, or to
allow others to install facilities or use the electric utility's
facilities for the provision of broadband service.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 2, eff.
September 7, 2005.
Amended by:
Acts 2021, 87th Leg., R.S., Ch. 727 (H.B. 3853), Sec. 1, eff.
June 15, 2021.

Sec. 43.003. DEFINITIONS. In this chapter:

(1) "Broadband service" means retail Internet service
provided by a commercial Internet service provider with the
capability of providing a download speed of at least 25 megabits per
second and an upload speed of at least 3 megabits per second.
(2) "Internet service provider" means a commercial entity
that provides Internet services to end-use customers on a retail
basis.
(3) "Electric delivery system" means the power lines and
related transmission and distribution facilities constructed to
deliver electric energy to the electric utility's customers.
(4) "Electric utility" includes an electric utility and a
transmission and distribution utility as defined in Section 31.002(6)
or (19).
(5) "Middle mile broadband service" means the provision of
excess fiber capacity on an electric utility's electric delivery
system or other facilities to an Internet service provider to provide
broadband service. The term does not include provision of Internet
service to end-use customers on a retail basis.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 2, eff.
September 7, 2005.
Amended by:

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Acts 2021, 87th Leg., R.S., Ch. 727 (H.B. 3853), Sec. 1, eff.
June 15, 2021.

SUBCHAPTER B. DEVELOPMENT OF MIDDLE MILE BROADBAND SERVICE

Sec. 43.051. AUTHORIZATION FOR MIDDLE MILE BROADBAND SERVICE.
(a) An electric utility may own, construct, maintain, and operate
fiber optic cables and other facilities for providing middle mile
broadband service in unserved and underserved areas consistent with
the requirements of this chapter. Nothing in this chapter prohibits
an entity defined in Section 11.003(9) from providing broadband
service to an Internet service provider or owning and operating a
broadband system as otherwise permitted by law.
(b) The electric utility shall determine on a nondiscriminatory
basis which Internet service providers may access excess fiber
capacity on the electric utility's electric delivery system or other
facilities and provide access points to allow connection between the
electric utility's electric delivery system or other facilities and
the systems of those Internet service providers. The electric
utility shall provide access to excess fiber capacity only on
reasonable and nondiscriminatory terms and conditions that assure the
electric utility the unimpaired ability to comply with and enforce
all applicable federal and state requirements regarding the safety,
reliability, and security of the electric delivery system.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 2, eff.
September 7, 2005.
Amended by:
Acts 2021, 87th Leg., R.S., Ch. 727 (H.B. 3853), Sec. 1, eff.
June 15, 2021.

Sec. 43.052. CHARGES. An electric utility that owns and

operates facilities to provide middle mile broadband service may
lease excess fiber capacity on the electric utility's electric
delivery system or other facilities to an Internet service provider
on a wholesale basis and shall charge the Internet service provider
for the use of the electric utility's system for all costs associated
with that use. The rates, terms, and conditions of a lease of excess
fiber capacity described by this section must be nondiscriminatory.

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An electric utility may not lease excess fiber capacity to provide

middle mile broadband service to an affiliated Internet service
provider.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 2, eff.
September 7, 2005.
Amended by:
Acts 2021, 87th Leg., R.S., Ch. 727 (H.B. 3853), Sec. 1, eff.
June 15, 2021.

Sec. 43.053. NO ADDITIONAL EASEMENTS OR CONSIDERATION REQUIRED.

(a) Because broadband systems provide benefits to electric delivery
systems, the installation of facilities to provide middle mile
broadband service on an electric delivery system or other facilities
does not require the electric utility or an entity defined in Section
11.003(9) to obtain, modify, or expand easements or other rights-of-
way for the middle mile broadband service or to give additional
consideration as a result of the installation or the operation of
middle mile broadband service on the electric delivery system or
other facilities of the electric utility or entity, unless the
property owner protests the use as provided by this section.
(b) Not later than the 60th day before the date an electric
utility begins construction in an easement or other property right of
fiber optic cables and other facilities for providing middle mile
broadband service, the electric utility shall provide written notice
to the owners of the affected property of the electric utility's
intent to use the easement or other property right for middle mile
broadband service.
(c) Notice under this section must:
(1) be sent by first class mail to the last known address
of each person in whose name the affected property is listed on the
most recent tax roll of each county authorized to levy property taxes
against the property; and
(2) state whether any new fiber optic cables used for
middle mile broadband service will be located above or below ground
in the easement or other property right.
(d) Not later than the 60th day after the date an electric
utility mails notice under this section, a property owner entitled to
the notice may submit to the electric utility a written protest of

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the intended use of the easement or other property right for middle
mile broadband service. An electric utility that receives a timely
written protest may not use the easement or other property right for
middle mile broadband service unless the protestor later agrees in
writing to that use or that use is authorized by law. If a property
owner fails to submit a timely written protest, an electric utility
may proceed under Subsection (a) without modifying or expanding the
easement for that property owner.
(e) An electric utility that receives a timely written protest
under Subsection (d) regarding proposed middle mile broadband service
may cancel the project at any time.
(f) The requirements of this section do not apply to an
existing easement that permits the provision of third-party middle
mile broadband service on an electric delivery system.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 2, eff.
September 7, 2005.
Amended by:
Acts 2021, 87th Leg., R.S., Ch. 727 (H.B. 3853), Sec. 1, eff.
June 15, 2021.

Sec. 43.054. RELIABILITY OF ELECTRIC SYSTEMS MAINTAINED. An

electric utility that installs and operates facilities to provide
middle mile broadband service shall employ all reasonable measures to
ensure that the operation of the middle mile broadband service does
not interfere with or diminish the reliability of the utility's
electric delivery system. If a disruption in the provision of
electric service occurs, the electric utility is governed by the
terms and conditions of the retail electric delivery service tariff.
The electric utility may take all necessary actions regarding its
middle mile broadband service and the facilities required in the
provision of that service to address circumstances that may pose
health, safety, security, or reliability concerns. At all times, the
provision of broadband service is secondary to the reliable provision
of electric delivery services. Except as provided by contract or
tariff, an electric utility is not liable to any person, including an
Internet service provider, for any damages, including direct,
indirect, physical, economic, exemplary, or consequential damages,
including loss of business, loss of profits or revenue, or loss of

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production capacity caused by a fluctuation, disruption, or

interruption of middle mile broadband service that is caused in whole
or in part by:
(1) force majeure; or
(2) the electric utility's provision of electric delivery
services, including actions taken by the electric utility to ensure
the reliability and security of the electric delivery system and
actions taken in response to address all circumstances that may pose
health, safety, security, or reliability concerns.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 2, eff.
September 7, 2005.
Amended by:
Acts 2021, 87th Leg., R.S., Ch. 727 (H.B. 3853), Sec. 1, eff.
June 15, 2021.

SUBCHAPTER C. IMPLEMENTATION OF MIDDLE MILE BROADBAND SERVICE BY

ELECTRIC UTILITY
Sec. 43.101. PARTICIPATION BY ELECTRIC UTILITY. (a) An
electric utility may install and operate facilities to provide middle
mile broadband service on any part of its electric delivery system or
other facilities for Internet service providers but may not construct
new electric delivery facilities for the purpose of expanding the
electric utility's middle mile broadband service.
(b) The installation, operation, and use of middle mile
broadband service and the lease of excess fiber capacity by Internet
service providers from an electric utility may not be regulated by
any state agency, a municipality, or local government other than as
provided by this chapter.
(c) An electric utility that owns and operates middle mile
broadband service:
(1) may lease excess fiber capacity on the electric
utility's electric delivery system or other facilities to an Internet
service provider on a wholesale basis; and
(2) may not provide Internet service to end-use customers
on a retail basis.
(d) The commission or a state or local government or a
regulatory or quasi-governmental or a quasi-regulatory authority may
not:

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(1) require an electric utility to install or offer middle

mile broadband service on the utility's electric delivery system or
other facilities;
(2) require an electric utility to allow others to install
middle mile broadband service on the utility's electric delivery
system or other facilities; or
(3) prohibit an electric utility from installing or
offering middle mile broadband service on the utility's electric
delivery system or other facilities.
(e) If a municipality or local government is already collecting
a charge or fee from the electric utility for the use of the public
rights-of-way for the delivery of electricity to retail electric
customers, the municipality or local government may not require a
franchise or an amendment to a franchise or require an additional
charge, fee, or tax from the electric utility for use of the public
rights-of-way for middle mile broadband service.
(f) If the state or a municipality or local government is not
already collecting a charge or fee from the electric utility for the
use of the public rights-of-way, the state or a municipality or local
government may impose a charge on the provision of middle mile
broadband service, but the charge may not be greater than the lowest
charge that the state or municipality imposes on other providers of
broadband service for use of the public rights-of-way in its
respective jurisdiction.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 2, eff.
September 7, 2005.
Amended by:
Acts 2021, 87th Leg., R.S., Ch. 727 (H.B. 3853), Sec. 1, eff.
June 15, 2021.

Sec. 43.102. COMMISSION REVIEW OF UTILITY MIDDLE MILE PLAN.

(a) An electric utility that plans a project to deploy middle mile
broadband service shall submit to the commission a written plan that
includes:
(1) the route of the middle mile broadband service
infrastructure proposed for the project;
(2) the location of the electric utility's infrastructure
that will be used in connection with the project;

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(3) an estimate of potential broadband customers that would

be served by the Internet service provider;
(4) the capacity, number of fiber strands, and any other
facilities of the middle mile broadband service that will be
available to lease to Internet service providers;
(5) the estimated cost of the project, including
engineering costs, construction costs, permitting costs, right-of-way
costs, and a reasonable allowance for funds used during construction;
(6) the proposed schedule of construction for the project;
(7) testimony, exhibits, or other evidence that
demonstrates the project will allow for the provision and maintenance
of middle mile broadband service; and
(8) any other information that the applicant considers
relevant or that the commission requires.
(b) The commission, after notice and hearing if required by the
commission, shall approve the plan if the commission finds that the
plan includes all the items required by Subsection (a) and by
commission rule.
(c) The commission must approve, modify, or reject a plan
submitted to the commission under this section not later than the
181st day after the date the plan is submitted under Subsection (a).
(d) An approved plan may be updated or amended subject to
commission approval in accordance with this section.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 2, eff.
September 7, 2005.
Amended by:
Acts 2021, 87th Leg., R.S., Ch. 727 (H.B. 3853), Sec. 1, eff.
June 15, 2021.

Sec. 43.103. COST RECOVERY FOR DEPLOYMENT OF MIDDLE MILE

BROADBAND FACILITIES. (a) Where an electric utility installs
facilities used to provide middle mile broadband service under
Section 43.051, the electric utility's investment in those facilities
is eligible for inclusion in the electric utility's invested capital,
and any fees or operating expenses that are reasonable and necessary
are eligible for inclusion as operating expenses for purposes of any
proceeding under Chapter 36. The commission may allow an electric
utility to recover investment and associated costs in middle mile

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broadband service if the plan for the service has been submitted and
approved under Section 43.102.
(b) In a proceeding under Chapter 36, revenue received by an
electric utility from an Internet service provider for the use of
middle mile broadband service must be applied as a revenue credit to
customers in proportion to the customers' funding of the underlying
infrastructure.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 2, eff.
September 7, 2005.
Amended by:
Acts 2021, 87th Leg., R.S., Ch. 727 (H.B. 3853), Sec. 1, eff.
June 15, 2021.

SUBCHAPTER D. MISCELLANEOUS PROVISIONS

Sec. 43.151. COMPLIANCE WITH FEDERAL AND STATE LAW. An
electric utility that owns and operates facilities for the provision
of middle mile broadband service shall comply with all applicable
federal and state laws.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 2, eff.
September 7, 2005.
Amended by:
Acts 2021, 87th Leg., R.S., Ch. 727 (H.B. 3853), Sec. 1, eff.
June 15, 2021.

SUBTITLE C. TELECOMMUNICATIONS UTILITIES

CHAPTER 51. GENERAL PROVISIONS
Sec. 51.001. POLICY. (a) Significant changes have occurred in
telecommunications since the law from which this title is derived was
originally adopted. Communications providers, including providers
not subject to state regulation, such as wireless communications
providers and Voice over Internet Protocol providers, have made
investments in this state and broadened the range of communications
choices available to consumers. To encourage and accelerate the
development of a competitive and advanced telecommunications
environment and infrastructure, rules, policies, and principles must
be reformulated to reduce regulation of incumbent local exchange
companies, ensure fair business practices, and protect the public

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interest.
(b) It is the policy of this state to:
(1) promote diversity of telecommunications providers and
interconnectivity;
(2) encourage a fully competitive telecommunications
marketplace; and
(3) maintain a wide availability of high quality,
interoperable, standards-based telecommunications services at
affordable rates.
(c) The policy goals described by Subsection (b) are best
achieved by legislation that modernizes telecommunications regulation
by:
(1) guaranteeing the affordability of basic telephone
service in a competitively neutral manner; and
(2) fostering free market competition in the
telecommunications industry.
(d) The technological advancements, advanced telecommunications
infrastructure, and increased customer choices for telecommunications
services generated by a truly competitive market play a critical role
in Texas' economic future by raising living standards for Texans
through:
(1) enhanced economic development; and
(2) improved delivery of education, health, and other
public and private services.
(e) The strength of competitive forces varies widely between
markets, products, and services. It is the policy of this state to
require the commission to take action necessary to enhance
competition by adjusting regulation to match the degree of
competition in the marketplace to:
(1) reduce the cost and burden of regulation; and
(2) protect markets that are not competitive.
(f) It is the policy of this state to ensure that high quality
telecommunications services are available, accessible, and usable by
an individual with a disability, unless making the services
available, accessible, or usable would:
(1) result in an undue burden, including unreasonable cost
or technical infeasibility; or
(2) have an adverse competitive effect.
(g) It is the policy of this state to ensure that customers in
all regions of this state, including low-income customers and

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customers in rural and high cost areas, have access to

telecommunications and information services, including interexchange
services, cable services, wireless services, and advanced
telecommunications and information services, that are reasonably
comparable to those services provided in urban areas and that are
available at prices that are reasonably comparable to prices charged
for similar services in urban areas.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 1212, Sec. 4, eff. Sept. 1, 1999.
Amended by:
Acts 2011, 82nd Leg., R.S., Ch. 98 (S.B. 980), Sec. 1, eff.
September 1, 2011.

Sec. 51.002. DEFINITIONS. In this subtitle:

(1) "Basic local telecommunications service" means:
(A) flat rate residential and business local exchange
telephone service, including primary directory listings;
(B) tone dialing service;
(C) access to operator services;
(D) access to directory assistance services;
(E) access to 911 service provided by a local authority
or dual party relay service;
(F) the ability to report service problems seven days a
week;
(G) lifeline and tel-assistance services; and
(H) any other service the commission determines after a
hearing is a basic local telecommunications service.
(2) "Dominant carrier" means a provider of a communication
service provided wholly or partly over a telephone system who the
commission determines has sufficient market power in a
telecommunications market to control prices for that service in that
market in a manner adverse to the public interest. The term includes
a provider who provided local exchange telephone service within a
certificated exchange area on September 1, 1995, as to that service
and as to any other service for which a competitive alternative is
not available in a particular geographic market. In addition, with
respect to:
(A) intraLATA long distance message telecommunications

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service originated by dialing the access code "1-plus," the term

includes a provider of local exchange telephone service in a
certificated exchange area for whom the use of that access code for
the origination of "1-plus" intraLATA calls in the exchange area is
exclusive; and
(B) interexchange services, the term does not include
an interexchange carrier that is not a certificated local exchange
company.
(3) "Incumbent local exchange company" means a local
exchange company that has a certificate of convenience and necessity
on September 1, 1995.
(3-a) "Internet Protocol enabled service" means a service,
capability, functionality, or application that uses Internet Protocol
or a successor protocol to allow an end user to send or receive a
data, video, or voice communication in Internet Protocol or a
successor protocol.
(4) "Local exchange company" means a telecommunications
utility that has a certificate of convenience and necessity or a
certificate of operating authority to provide in this state:
(A) local exchange telephone service;
(B) basic local telecommunications service; or
(C) switched access service.
(5) "Local exchange telephone service" means
telecommunications service provided within an exchange to establish
connections between customer premises within the exchange, including
connections between a customer premises and a long distance provider
serving the exchange. The term includes tone dialing service,
service connection charges, and directory assistance services offered
in connection with basic local telecommunications service and
interconnection with other service providers. The term does not
include the following services, whether offered on an intraexchange
or interexchange basis:
(A) central office based PBX-type services for systems
of 75 stations or more;
(B) billing and collection services;
(C) high-speed private line services of 1.544 megabits
or greater;
(D) customized services;
(E) private line or virtual private line services;
(F) resold or shared local exchange telephone services

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if permitted by tariff;
(G) dark fiber services;
(H) non-voice data transmission service offered as a
separate service and not as a component of basic local
telecommunications service;
(I) dedicated or virtually dedicated access services;
or
(J) any other service the commission determines is not
a "local exchange telephone service."
(6) "Long run incremental cost" has the meaning assigned by
16 T.A.C. Section 23.91 or its successor.
(7) "Pricing flexibility" includes:
(A) customer specific contracts;
(B) packaging of services;
(C) volume, term, and discount pricing;
(D) zone density pricing, with a zone to be defined as
an exchange; and
(E) other promotional pricing.
(8) "Public utility" or "utility" means a person or river
authority that owns or operates for compensation in this state
equipment or facilities to convey, transmit, or receive
communications over a telephone system as a dominant carrier. The
term includes a lessee, trustee, or receiver of any of those
entities, or a combination of those entities. The term does not
include a municipal corporation. A person is not a public utility
solely because the person:
(A) furnishes or furnishes and maintains a private
system;
(B) manufactures, distributes, installs, or maintains
customer premise communications equipment and accessories; or
(C) furnishes a telecommunications service or commodity
only to itself, its employees, or its tenants as an incident of
employment or tenancy, if that service or commodity is not resold to
or used by others.
(9) "Separation" means the division of plant, revenues,
expenses, taxes, and reserves applicable to exchange or local service
if these items are used in common to provide public utility service
to both local exchange telephone service and other service, such as
interstate or intrastate toll service.
(10) "Telecommunications provider":

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(A) means:
(i) a certificated telecommunications utility;
(ii) a shared tenant service provider;
(iii) a nondominant carrier of telecommunications
services;
(iv) a provider of commercial mobile service as
defined by Section 332(d), Communications Act of 1934 (47 U.S.C.
Section 151 et seq.), Federal Communications Commission rules, and
the Omnibus Budget Reconciliation Act of 1993 (Public Law 103-66),
except that the term does not include these entities for the purposes
of Chapter 17, 55, or 64;
(v) a telecommunications entity that provides
central office based PBX-type sharing or resale arrangements;
(vi) an interexchange telecommunications carrier;
(vii) a specialized common carrier;
(viii) a reseller of communications;
(ix) a provider of operator services;
(x) a provider of customer-owned pay telephone
service; or
(xi) a person or entity determined by the
commission to provide telecommunications services to customers in
this state; and
(B) does not mean:
(i) a provider of enhanced or information services,
or another user of telecommunications services, who does not also
provide telecommunications services; or
(ii) a state agency or state institution of higher
education, or a service provided by a state agency or state
institution of higher education.
(11) "Telecommunications utility" means:
(A) a public utility;
(B) an interexchange telecommunications carrier,
including a reseller of interexchange telecommunications services;
(C) a specialized communications common carrier;
(D) a reseller of communications;
(E) a communications carrier who conveys, transmits, or
receives communications wholly or partly over a telephone system;
(F) a provider of operator services as defined by
Section 55.081, unless the provider is a subscriber to customer-owned
pay telephone service; and

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(G) a separated affiliate or an electronic publishing

joint venture as defined in Chapter 63.
(12) "Tier 1 local exchange company" has the meaning
assigned by the Federal Communications Commission.
(13) "Voice over Internet Protocol service" means a service
that:
(A) uses Internet Protocol or a successor protocol to
enable a real-time, two-way voice communication that originates from
or terminates to the user's location in Internet Protocol or a
successor protocol;
(B) requires a broadband connection from the user's
location; and
(C) permits a user generally to receive a call that
originates on the public switched telephone network and to terminate
a call to the public switched telephone network.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 1212, Sec. 5, eff. Sept. 1, 1999; Acts
1999, 76th Leg., ch. 1579, Sec. 4, eff. Aug. 30, 1999; Acts 2001,
77th Leg., ch. 651, Sec. 5, eff. Sept. 1, 2001.
Amended by:
Acts 2011, 82nd Leg., R.S., Ch. 98 (S.B. 980), Sec. 2, eff.
September 1, 2011.

Sec. 51.003. APPLICABILITY. Except as otherwise expressly

provided by this title, this title does not apply to:
(1) a company that as its only form of business:
(A) is a telecommunications manager; or
(B) administers central office based or customer based
PBX-type sharing/resale arrangements;
(2) telegraph services;
(3) television or radio stations;
(4) community antenna television services; or
(5) a provider of commercial mobile service as defined by
Section 332(d), Communications Act of 1934 (47 U.S.C. Section 151 et
seq.), Federal Communications Commission rules, and the Omnibus
Budget Reconciliation Act of 1993 (Public Law 103-66), other than
conventional rural radio-telephone services provided by a wire-line
telephone company under the Public Mobile Service rules of the

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Federal Communications Commission (47 C.F.R. Part 22).

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 51.004. PRICING FLEXIBILITY. (a) A discount or other

form of pricing flexibility may not be:
(1) unreasonably preferential, prejudicial, or
discriminatory; or
(2) predatory or anticompetitive.
(b) This title does not prohibit a volume discount or other
discount based on a reasonable business purpose. A price that is set
at or above the long run incremental cost of a service is presumed
not to be a predatory price.
(c) This title allows an offer based on a reasonable business
purpose, including an offer made at any time to a selected customer
or a group of customers in response to a competitor's offer or a
former customer's acceptance of a competitor's offer if the price of
the offer meets the requirements of Section 52.0584, 58.063, or
59.031.
(d) An offer made under Subsection (c) must be made in
compliance with Chapter 304, Business & Commerce Code.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 1212, Sec. 6, eff. Sept. 1, 1999; Acts
2003, 78th Leg., ch. 32, Sec. 1, eff. Sept. 1, 2003.
Amended by:
Acts 2007, 80th Leg., R.S., Ch. 885 (H.B. 2278), Sec. 2.39, eff.
April 1, 2009.

Sec. 51.005. ASSISTANCE TO MUNICIPALITY. On request of a

municipality, the commission may advise and assist the municipality
with respect to a question or proceeding arising under this title.
Assistance provided by the commission may include aid to a
municipality on a matter pending before the commission or a court,
such as making a staff member available as a witness or otherwise
providing evidence to the municipality.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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Sec. 51.006. MUNICIPAL PARTICIPATION IN RATEMAKING PROCEEDINGS.

(a) The governing body of a municipality participating in a
ratemaking proceeding may engage rate consultants, accountants,
auditors, attorneys, and engineers to:
(1) conduct investigations, present evidence, and advise
and represent the governing body; and
(2) assist the governing body with litigation before the
commission or a court.
(b) The public utility in the ratemaking proceeding shall
reimburse the governing body of the municipality for the reasonable
cost of the services of a person engaged under Subsection (a) to the
extent the commission determines is reasonable.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 51.007. MUNICIPAL STANDING IN CERTAIN CASES. (a) A

municipality has standing in each case before the commission that
relates to a utility providing service in the municipality.
(b) A municipality's standing is subject to the right of the
commission to:
(1) determine standing in a case involving a retail service
area dispute that involves two or more utilities; and
(2) consolidate municipalities on an issue of common
interest.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 51.008. JUDICIAL REVIEW. A municipality is entitled to

judicial review of a commission order relating to a utility providing
services in the municipality as provided by Section 15.001.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 51.009. MUNICIPAL FEES. (a) Nothing in this title,

including Section 53.201, may be construed as in any way limiting the
right of a public utility to pass through a municipal fee, including
an increase in a municipal fee.
(b) A public utility that traditionally passes through

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municipal fees shall promptly pass through any municipal fee

reduction.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 51.010. COMMISSION INVESTIGATION OF SALE, MERGER, OR

CERTAIN OTHER ACTIONS. (a) The commission, not later than the 180th
day after the date a public utility reports to the commission under
Section 14.101, shall complete an investigation under that section
and enter a final order.
(b) If a final order is not entered as required by Subsection
(a), the commission is considered to have determined that the action
taken by the public utility is consistent with the public interest.
(c) Section 14.101 does not apply to:
(1) a company that receives a certificate of operating
authority or a service provider certificate of operating authority
under Chapter 54; or
(2) a company electing under Chapter 58.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

CHAPTER 52. COMMISSION JURISDICTION

SUBCHAPTER A. GENERAL POWERS AND DUTIES OF COMMISSION
Sec. 52.001. POLICY. (a) It is the policy of this state to
protect the public interest in having adequate and efficient
telecommunications service available to each resident of this state
at just, fair, and reasonable rates.
(b) The telecommunications industry, through technical
advancements, federal legislative, judicial, and administrative
actions, and the formulation of new telecommunications enterprises,
has become and will continue to be in many and growing areas a
competitive industry that does not lend itself to traditional public
utility regulatory rules, policies, and principles. As a result, the
public interest requires that rules, policies, and principles be
formulated and applied to:
(1) protect the public interest; and
(2) provide equal opportunity to each telecommunications
utility in a competitive marketplace.

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Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 52.002. AUTHORITY TO REGULATE. (a) To carry out the

public policy stated by Section 52.001 and to regulate rates,
operations, and services so that the rates are just, fair, and
reasonable and the services are adequate and efficient, the
commission has exclusive original jurisdiction over the business and
property of a telecommunications utility in this state subject to the
limitations imposed by this title.
(b) The commission's regulatory authority as to a
telecommunications utility other than a public utility is only as
prescribed by this title.
(c) The commission may not require a telecommunications utility
that is not a public utility, including a deregulated or
transitioning company, to comply with a requirement or standard that
is more burdensome than a requirement or standard the commission
imposes on a public utility.
(d) Notwithstanding any other law, a department, agency, or
political subdivision of this state may not by rule, order, or other
means directly or indirectly regulate rates charged for, service or
contract terms for, conditions for, or requirements for entry into
the market for Voice over Internet Protocol services or other
Internet Protocol enabled services. This subsection does not:
(1) affect requirements pertaining to use of a right-of-way
or payment of right-of-way fees applicable to Voice over Internet
Protocol services under Chapter 283, Local Government Code;
(2) affect any person's obligation to provide video or
cable service, as defined under applicable state or federal law, the
applicability of Chapter 66, or a requirement to make a payment under
Chapter 66;
(3) require or prohibit assessment of enhanced 9-1-1, relay
access service, or universal service fund fees on Voice over Internet
Protocol service;
(4) affect any entity's obligations under Sections 251 and
252, Communications Act of 1934 (47 U.S.C. Sections 251 and 252), or
a right granted to an entity by those sections;
(5) affect any applicable wholesale tariff;
(6) grant, modify, or affect the authority of the
commission to implement, carry out, or enforce the rights or

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obligations provided by Sections 251 and 252, Communications Act of

1934 (47 U.S.C. Sections 251 and 252), or of an applicable wholesale
tariff through arbitration proceedings or other available mechanisms
and procedures;
(7) require or prohibit payment of switched network access
rates or other intercarrier compensation rates, as applicable;
(8) limit any commission authority over the subjects listed
in Subdivisions (1)-(7) or grant the commission any authority over
those subjects; or
(9) affect the assessment, administration, collection, or
enforcement of any tax or fee over which the comptroller has
authority.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2011, 82nd Leg., R.S., Ch. 98 (S.B. 980), Sec. 3, eff.
September 1, 2011.

Sec. 52.003. COOPERATION WITH OTHER REGULATORY AUTHORITIES. In

regulating the rates, operations, and services of a
telecommunications utility providing service in a municipality
located on the state line adjacent to a municipality in an adjoining
state, the commission may cooperate with the utility regulatory
commission of the adjoining state or of the federal government and
may hold a joint hearing or make a joint investigation with that
commission.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 52.004. COMMISSION MAY ESTABLISH SEPARATE MARKETS. (a)

The commission may establish separate telecommunications markets in
this state if the commission determines that the public interest will
be served. The commission shall hold hearings and require evidence
as necessary to:
(1) carry out the public purpose of this chapter; and
(2) determine the need and effect of establishing separate
markets.
(b) A provider determined to be a dominant carrier as to a
particular telecommunications service in a market may not be presumed

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to be a dominant carrier of a different telecommunications service in

that market.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 52.005. MINIMUM REQUIREMENTS FOR DOMINANT CARRIERS. The

commission shall impose as minimum requirements for a dominant
carrier the same requirements imposed by Subchapter C, except Section
52.107.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 52.007. TARIFF REQUIREMENTS RELATING TO PROVIDERS NOT

SUBJECT TO RATE OF RETURN REGULATION. (a) This section applies only
to a telecommunications provider that is not subject to rate of
return regulation under Chapter 53.
(b) A telecommunications provider:
(1) may, but is not required to, maintain on file with the
commission tariffs, price lists, or customer service agreements
governing the terms of providing service;
(2) may make changes in its tariffs, price lists, and
customer service agreements in relation to services that are not
subject to regulation without commission approval; and
(3) may cross-reference its federal tariff in its state
tariff if the provider's intrastate switched access rates are the
same as the provider's interstate switched access rates.
(c) A telecommunications provider may withdraw a tariff, price
list, or customer service agreement not required to be filed or
maintained with the commission under this section if the
telecommunications provider:
(1) files written notice of the withdrawal with the
commission; and
(2) notifies its customers of the withdrawal and posts the
current tariffs, price lists, or generic customer service agreements
on the telecommunications provider's Internet website.
(d) The commission may not require a telecommunications
provider to withdraw a tariff, price list, or customer service
agreement.
(d-1) The commission may not require a nondominant carrier to

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obtain advance approval for a filing with the commission or a posting

on the nondominant carrier's Internet website that adds, modifies,
withdraws, or grandfathers a retail service or the service's rates,
terms, or conditions.
(d-2) In this subsection, "deregulated company" and
"transitioning company" have the meanings assigned by Section 65.002.
The commission may not require a deregulated company or transitioning
company to obtain advance approval for a filing with the commission
or a posting on the company's Internet website that adds, modifies,
withdraws, or grandfathers:
(1) a nonbasic retail service or the service's rates,
terms, or conditions; or
(2) for a market that has been deregulated, a basic network
service or the service's rates, terms, or conditions.
(d-3) Unless an interconnection agreement contract specifies
otherwise, an incumbent local exchange carrier shall continue to
provide to affected resellers of retail services the same notice of
rate changes or withdrawal of detariffed services that it was
required to provide prior to detariffing.
(e) This section does not affect the authority of the
commission to regulate wholesale services, or administer or enforce
Chapter 56 or any other applicable regulation permitted or required
under this title.

Added by Acts 2011, 82nd Leg., R.S., Ch. 98 (S.B. 980), Sec. 4, eff.
September 1, 2011.
Amended by:
Acts 2013, 83rd Leg., R.S., Ch. 210 (S.B. 259), Sec. 1, eff.
September 1, 2013.

SUBCHAPTER B. INCUMBENT LOCAL EXCHANGE COMPANIES

Sec. 52.051. POLICY. In adopting rules and establishing
procedures under this subchapter, the commission shall:
(1) attempt to balance the public interest in a
technologically advanced telecommunications system providing a wide
range of new and innovative services with traditional regulatory
concerns for:
(A) preserving universal service;
(B) prohibiting anticompetitive practices; and

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(C) preventing the subsidization of competitive

services with revenues from regulated monopoly services; and
(2) incorporate an appropriate mix of regulatory and market
mechanisms reflecting the level and nature of competition in the
marketplace.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 52.052. APPLICABILITY. This subchapter does not apply to

basic local telecommunications service, including local measured
service.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 52.053. CERTAIN RATES PROHIBITED. A rate established

under this subchapter may not be:
(1) unreasonably preferential, prejudicial, or
discriminatory;
(2) subsidized either directly or indirectly by a regulated
monopoly service; or
(3) predatory or anticompetitive.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 52.054. RULES AND PROCEDURES FOR INCUMBENT LOCAL EXCHANGE

COMPANIES. (a) To carry out the public policy stated in Section
52.001, notwithstanding any other provision of this title, the
commission may adopt rules and establish procedures applicable to
incumbent local exchange companies to:
(1) determine the level of competition in a specific
telecommunications market or submarket; and
(2) provide appropriate regulatory treatment to allow an
incumbent local exchange company to respond to significant
competitive challenges.
(b) This section does not change the burden of proof on an
incumbent local exchange company under Sections 53.003, 53.006,
53.051, 53.052, 53.053, 53.054, 53.055, 53.057, 53.058, 53.060, and
53.062.

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Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 52.055. HEARING TO DETERMINE LEVEL OF COMPETITION. In

determining the level of competition in a specific market or
submarket, the commission shall hold an evidentiary hearing to
consider:
(1) the number and size of telecommunications utilities or
other persons providing the same, equivalent, or substitutable
service;
(2) the extent to which the same, equivalent, or
substitutable service is available;
(3) the ability of a customer to obtain the same,
equivalent, or substitutable service at comparable rates and terms;
(4) the ability of a telecommunications utility or other
person to make the same, equivalent, or substitutable service readily
available at comparable rates and terms;
(5) the existence of a significant barrier to the entry or
exit of a provider of the service; and
(6) other relevant information the commission determines is
appropriate.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 52.056. SPECIFICALLY AUTHORIZED REGULATORY TREATMENTS.

The regulatory treatments the commission may implement under Section
52.054 include:
(1) approval of a range of rates for a specific service;
and
(2) the detariffing of rates.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2011, 82nd Leg., R.S., Ch. 21 (S.B. 983), Sec. 1, eff.
September 1, 2011.
Acts 2011, 82nd Leg., R.S., Ch. 98 (S.B. 980), Sec. 5, eff.
September 1, 2011.

Sec. 52.058. GENERAL PROVISIONS RELATING TO NEW OR EXPERIMENTAL

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SERVICES OR PROMOTIONAL RATES. (a) To encourage the rapid

introduction of new or experimental services or promotional rates,
the commission shall adopt rules and establish procedures that allow:
(1) the expedited introduction of new or experimental
services or promotional rates;
(2) the establishment and adjustment of rates; and
(3) the withdrawal of those services or promotional rates.
(b) The rules and procedures described by Subsection (a) must
include rules and procedures to allow the governing body of a
municipality served by an incumbent local exchange company having
more than 500,000 access lines in this state to make requests to the
commission for new or experimental services or promotional rates.
(c) A rate established or adjusted at the request of a
municipality may not:
(1) result in higher rates for ratepayers outside the
municipal boundaries; or
(2) include a rate for incumbent local exchange company
interexchange service or interexchange carrier access service.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 1212, Sec. 7, eff. Sept. 1, 1999.

Sec. 52.0583. NEW SERVICES. (a) An incumbent local exchange

company may introduce a new service 10 days after providing an
informational notice to the commission, to the office, and to any
person who holds a certificate of operating authority in the
incumbent local exchange company's certificated area or areas or who
has an effective interconnection agreement with the incumbent local
exchange company.
(b) An incumbent local exchange company shall price each new
service at or above the service's long run incremental cost. The
commission shall allow a company serving fewer than one million
access lines in this state to establish a service's long run
incremental cost by adopting, at that company's option, the cost
studies of a larger company for that service that have been accepted
by the commission.
(c) An affected person, the office on behalf of residential or
small commercial customers, or the commission may file a complaint at
the commission challenging whether the pricing by an incumbent local

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exchange company of a new service is in compliance with Subsection

(b).
(d) If a complaint is filed under Subsection (c), the incumbent
local exchange company has the burden of proving that the company set
the price for the new service in accordance with the applicable
provisions of this subchapter. If the complaint is finally resolved
in favor of the complainant, the company:
(1) shall, not later than the 10th day after the date the
complaint is finally resolved, amend the price of the service as
necessary to comply with the final resolution; or
(2) may, at the company's option, discontinue the service.
(e) A company electing incentive regulation under Chapter 58 or
59 may introduce new services only in accordance with the applicable
provisions of Chapter 58 or 59.

Added by Acts 1999, 76th Leg., ch. 1212, Sec. 8, eff. Sept. 1, 1999.

Sec. 52.0584. PRICING AND PACKAGING FLEXIBILITY; CUSTOMER

PROMOTIONAL OFFERINGS. (a) Notwithstanding any other provision of
this title, an incumbent local exchange company may exercise pricing
flexibility in accordance with this section, including the packaging
of any regulated service such as basic local telecommunications
service with any other regulated or unregulated service or any
service of an affiliate. The company may exercise pricing
flexibility 10 days after providing an informational notice to the
commission, to the office, and to any person who holds a certificate
of operating authority in the incumbent local exchange company's
certificated area or areas or who has an effective interconnection
agreement with the incumbent local exchange company. Pricing
flexibility includes all pricing arrangements included in the
definition of "pricing flexibility" prescribed by Section 51.002 and
includes packaging of any regulated service with any unregulated
service or any service of an affiliate.
(b) An incumbent local exchange company, at the company's
option, shall price each regulated service offered separately or as
part of a package under Subsection (a) at either the service's
tariffed rate or at a rate not lower than the service's long run
incremental cost. The commission shall allow a company serving fewer
than one million access lines in this state to establish a service's

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long run incremental cost by adopting, at that company's option, the

cost studies of a larger company for that service that have been
accepted by the commission.
(c) An affected person, the office on behalf of residential or
small commercial customers, or the commission may file a complaint
alleging that an incumbent local exchange company has priced a
regulated service in a manner that does not meet the pricing
standards of this subchapter. The complaint must be filed before the
31st day after the date the company implements the rate.
(d) A company electing incentive regulation under Chapter 58 or
59 may use pricing and packaging flexibility and introduce customer
promotional offerings only in accordance with the applicable
provisions of Chapter 58 or 59.

Added by Acts 1999, 76th Leg., ch. 1212, Sec. 8, eff. Sept. 1, 1999.

Sec. 52.0585. CUSTOMER PROMOTIONAL OFFERINGS. (a) An

incumbent local exchange company may offer a promotion for a
regulated service for not more than 90 days in any 12-month period.
(b) The company shall file with the commission a promotional
offering that consists of:
(1) waiver of installation charges or service order
charges, or both, for not more than 90 days in a 12-month period; or
(2) a temporary discount of not more than 25 percent from
the tariffed rate for not more than 60 days in a 12-month period.
(c) An incumbent local exchange company is not required to
obtain commission approval to make a promotional offering described
by Subsection (b).
(d) An incumbent local exchange company may offer a promotion
of any regulated service as part of a package of services consisting
of any regulated service with any other regulated or unregulated
service or any service of an affiliate.

Added by Acts 1999, 76th Leg., ch. 1212, Sec. 8, eff. Sept. 1, 1999.

Sec. 52.059. RATES TO COVER APPROPRIATE COSTS. (a) The

commission by rule shall adopt standards necessary to ensure that a
rate established under this subchapter covers appropriate costs as
determined by the commission.

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(b) Until standards are set under Subsection (a), the

commission shall use a costing methodology that is in the public
interest to determine whether a rate established under this
subchapter covers appropriate costs.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 52.060. ADMINISTRATIVE FEE OR ASSESSMENT. The commission

may prescribe and collect a fee or assessment from local exchange
companies necessary to recover the cost to the commission and to the
office of activities carried out and services provided under this
subchapter and Section 12.203.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2023, 88th Leg., R.S., Ch. 410 (H.B. 1500), Sec. 44, eff.
September 1, 2023.

SUBCHAPTER C. TELECOMMUNICATIONS UTILITIES THAT ARE NOT DOMINANT

CARRIERS
Sec. 52.101. APPLICABILITY. This subchapter applies only to a
telecommunications utility that is not:
(1) a dominant carrier; or
(2) the holder of a certificate of operating authority or a
service provider certificate of operating authority.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 52.102. LIMITED REGULATORY AUTHORITY. (a) Except as

otherwise provided by this subchapter, Subchapters D and K, Chapter
55, and Section 55.011, the commission has only the following
jurisdiction over a telecommunications utility subject to this
subchapter:
(1) to require registration under Section 52.103;
(2) to conduct an investigation under Section 52.104;
(3) to require the filing of reports as the commission
periodically directs;
(4) to require the maintenance of statewide average rates

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or prices of telecommunications service;

(5) to require a telecommunications utility that had more
than six percent of the total intrastate access minutes of use as
measured for the most recent 12-month period to pass switched access
rate reductions under this title to customers as required by Section
52.112;
(6) to require access to telecommunications service under
Section 52.105; and
(7) to require the quality of telecommunications service
provided to be adequate under Section 52.106.
(b) The authority provided by Subsection (a)(5) expires on the
date on which Section 52.112 expires.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 62, Sec. 18.04(a), eff. Sept. 1, 1999;
Acts 1999, 76th Leg., ch. 1212, Sec. 9, eff. Sept. 1, 1999.

Sec. 52.103. REGISTRATION REQUIRED. (a) A telecommunications

utility shall register with the commission not later than the 30th
day after the date the utility commences service to the public.
(b) A telecommunications utility that registers under
Subsection (a) shall file with the commission a description of:
(1) the location and type of service provided;
(2) the price to the public of that service; and
(3) other registration information the commission directs.
(c) An interexchange telecommunications utility doing business
in this state shall maintain on file with the commission tariffs or
lists governing the terms of providing its services.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 52.1035. RENEWAL OF CERTAIN CERTIFICATES. (a) The

commission by rule shall require each holder of a certificate of
operating authority and holder of a service provider certificate of
operating authority to file with the commission on a one-time or
regular basis:
(1) the certificate holder's name;
(2) the certificate holder's address; and
(3) the most recent version of each annual report the

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commission requires the certificate holder to file under this

subtitle.
(b) The rules must:
(1) require the commission to automatically allow a
certificate holder an extension of a filing deadline for the number
of days prescribed by the rule, as applicable; and
(2) state that the certificate of a holder will not be
valid after the last day of the automatic extension period described
by Subdivision (1) if the certificate holder does not file
information required by the commission under this section by the end
of the automatic extension period.
(c) A certificate holder whose certificate is no longer valid
may obtain a new certificate only by complying with the requirements
prescribed for obtaining an original certificate.

Added by Acts 2013, 83rd Leg., R.S., Ch. 170 (H.B. 1600), Sec. 1.11,
eff. September 1, 2013.

Sec. 52.104. COMMISSION MAY INVESTIGATE. (a) The commission

may investigate as necessary to determine the effect and scope of
competition in the telecommunications industry. The investigation
may include:
(1) identifying dominant carriers in the local
telecommunications and intraLATA interexchange telecommunications
industry; and
(2) defining the telecommunications market or markets.
(b) In conducting an investigation under this section, the
commission may:
(1) hold a hearing;
(2) issue a subpoena to compel the attendance of a witness
or the production of a document; and
(3) make findings of fact and decisions to administer this
title or a rule, order, or other action of the commission.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 52.105. ACCESS TO CERTAIN SERVICES REQUIRED. (a) The

commission may require that each local exchange area have access to
local and interexchange telecommunications service, except as

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otherwise provided by this section.

(b) The commission shall allow a telecommunications utility to
discontinue service to a local exchange area if:
(1) comparable service is available in the area; and
(2) discontinuing the service is not contrary to the public
interest.
(c) This section does not authorize the commission to require a
telecommunications utility to initiate service to a local exchange
area to which the telecommunications utility:
(1) did not provide service during the preceding 12-month
period; and
(2) has not provided service previously for a cumulative
period of at least one year.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 52.106. QUALITY OF SERVICE REQUIRED. The commission may

require the quality of telecommunications service provided in a local
exchange in which the commission determines that service has
deteriorated and become unreliable to be adequate to protect the
public interest and the interests of customers of that exchange.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 52.107. PREDATORY PRICING. (a) The commission may enter

an order necessary to protect the public interest if the commission
finds by a preponderance of the evidence after notice and hearing
that an interexchange telecommunications utility has:
(1) engaged in predatory pricing; or
(2) attempted to engage in predatory pricing.
(b) A hearing held by the commission under Subsection (a) must
be based on a complaint from another interexchange telecommunications
utility.
(c) An order entered under Subsection (a) may include the
imposition on a specific service of the commission's full regulatory
authority under:
(1) this chapter;
(2) Chapters 14, 15, 51, 53, and 54; and
(3) Subchapters A, D, and H, Chapter 55.

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(d) This section applies only to an interexchange

telecommunications utility.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 52.108. OTHER PROHIBITED PRACTICES. The commission may

enter any order necessary to protect the public interest if the
commission finds after notice and hearing that a telecommunications
utility has:
(1) failed to maintain statewide average rates;
(2) abandoned interexchange message telecommunications
service to a local exchange area in a manner contrary to the public
interest;
(3) engaged in a pattern of preferential or discriminatory
activities prohibited by Section 53.003, 55.005, or 55.006; or
(4) failed to pass switched access rate reductions to
customers under Chapter 56 or other law, as required by Section
52.112.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 1212, Sec. 10, eff. Sept. 1, 1999.

Sec. 52.109. AVAILABILITY OF SERVICE. (a) The commission may

require a telecommunications utility that provides a service to make
that service available in an exchange served by the
telecommunications utility within a reasonable time after receipt of
a bona fide request for the service in that exchange.
(b) A telecommunications utility may not be required to extend
a service to an area if:
(1) the local exchange company is unable to provide the
required access or other service; or
(2) extending the service would, after consideration of the
public interest to be served, impose unreasonable costs on or require
unreasonable investments by the telecommunications utility.
(c) The commission may require from a telecommunications
utility or a local exchange company information necessary to enforce
this section.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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Sec. 52.110. BURDEN OF PROOF. (a) In a proceeding before the

commission in which it is alleged that a telecommunications utility
engaged in conduct in violation of Section 52.107, 52.108, 52.109, or
52.112, the burden of proof is on:
(1) a telecommunications utility complaining of conduct
committed against it in violation of this subchapter; or
(2) except as provided by Subsection (b), the responding
telecommunications utility if the proceedings are:
(A) brought by a customer or customer representative
who is not a telecommunications utility; or
(B) initiated by the commission.
(b) The commission may impose the burden of proof on the
complaining party in a proceeding described by Subsection (a)(2) if
the commission determines that placing the burden of proof on the
complaining party is in the public interest.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 1212, Sec. 11, eff. Sept. 1, 1999.

Sec. 52.111. COMMISSION MAY EXEMPT. The commission may exempt

from a requirement of this subchapter a telecommunications utility
that:
(1) does not have a significant effect on the public
interest, as determined by the commission; or
(2) relies solely on the facilities of others to complete
long distance calls, if the commission determines that the exemption
is in the public interest.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 52.112. REDUCTION PASS-THROUGH REQUIRED. (a) Each

telecommunications utility that had more than six percent of the
total intrastate access minutes of use as measured for the most
recent 12-month period shall pass through to customers switched
access rate reductions under this title. The residential customer
class shall receive not less than a proportionate share of the
reductions.

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(b) Within six months following each reduction in intrastate

switched access rates under this title, each telecommunications
utility subject to this section shall file with the commission a
sworn affidavit confirming that the utility has reduced the per
minute rates it charges under its basic rate schedule to reflect the
per minute reduction in intrastate switched access rates.
(c) This section expires on the second anniversary of the date
incumbent local exchange companies doing business in the state are no
longer prohibited by federal law from offering interLATA and
interstate long distance service.

Added by Acts 1999, 76th Leg., ch. 1212, Sec. 12, eff. Sept. 1, 1999.

SUBCHAPTER D. CERTIFICATE HOLDERS

Sec. 52.151. APPLICABILITY. This subchapter applies only to a
telecommunications utility that holds a certificate of operating
authority or a service provider certificate of operating authority.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 52.152. LIMITED REGULATORY AUTHORITY. Except as otherwise

specifically provided by this title, the commission has only the
following authority over a telecommunications utility subject to this
subchapter:
(1) to enforce this title under Subchapter B, Chapter 15;
(2) to assert jurisdiction over a specific service under
Subchapter E;
(3) to require co-carriage reciprocity; and
(4) to regulate condemnation and building access.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 52.153. BOOKS AND RECORDS. The commission may prescribe

forms of books, accounts, records, and memoranda to be kept by a
telecommunications utility, but only as necessary to enforce the
limited jurisdiction over those companies that this title provides to
the commission.

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Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 52.154. COMMISSION MAY NOT OVERBURDEN. The commission may

not, by a rule or regulatory practice adopted under this chapter,
impose on a nondominant telecommunications utility a greater
regulatory burden than is imposed on:
(1) a holder of a certificate of convenience and necessity
serving the same area; or
(2) a deregulated company, as defined by Section 65.002,
that:
(A) has 500,000 or more access lines in service at the
time it becomes a deregulated company; or
(B) serves an area also served by the nondominant
telecommunications utility.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2013, 83rd Leg., R.S., Ch. 210 (S.B. 259), Sec. 2, eff.
September 1, 2013.

Sec. 52.155. PROHIBITION OF EXCESSIVE ACCESS CHARGES. (a) A

telecommunications utility that holds a certificate of operating
authority or a service provider certificate of operating authority
may not charge a higher amount for originating or terminating
intrastate switched access than the prevailing rates charged by the
holder of the certificate of convenience and necessity or the holder
of a certificate of operating authority issued under Chapter 65 in
whose territory the call originated or terminated unless:
(1) the commission specifically approves the higher rate;
or
(2) subject to commission review, the telecommunications
utility establishes statewide average composite originating and
terminating intrastate switched access rates based on a reasonable
approximation of traffic originating and terminating between all
holders of certificates of convenience and necessity in this state.
(b) Notwithstanding any other provision of this title, the
commission has all jurisdiction necessary to enforce this section.
(c) Notwithstanding Subsection (a), Chapter 65 governs the

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switched access rates of a company that holds a certificate of

operating authority issued under Chapter 65.

Added by Acts 1999, 76th Leg., ch. 1212, Sec. 13, eff. Sept. 1, 1999.
Amended by:
Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 3, eff.
September 7, 2005.

Sec. 52.156. RETAIL RATES, TERMS, AND CONDITIONS. A

telecommunications utility may not:
(1) establish a retail rate, term, or condition that is
anticompetitive or unreasonably preferential, prejudicial, or
discriminatory; or
(2) engage in predatory pricing or attempt to engage in
predatory pricing.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 4, eff.
September 7, 2005.

SUBCHAPTER E. DEREGULATION OF SERVICE

Sec. 52.201. DEREGULATION OF SERVICE. Notwithstanding any
other provision of this title, the commission may deregulate the
price of a service in a geographic market if, after notice and
hearing, the commission determines that:
(1) the incumbent local exchange company is not dominant
for the service in that geographic market; or
(2) the holder of a certificate of operating authority who
is a dominant carrier is no longer dominant for the service in that
geographic market.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 52.202. DETERMINATION OF GEOGRAPHIC MARKET. In

determining the geographic market under Section 52.201, the
commission shall consider the economic and technical conditions of
the market.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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Sec. 52.203. MARKET POWER TEST. (a) To determine whether an

incumbent local exchange company or holder of a certificate of
operating authority who is a dominant carrier is no longer dominant
for a service in a geographic market, the commission must find that:
(1) there is an effective competitive alternative; and
(2) the incumbent local exchange company or certificate
holder does not have market power sufficient to control, in a manner
that is adverse to the public interest, the price of the service in
the geographic area.
(b) To determine whether the incumbent local exchange company
or certificate holder is dominant for a service in the geographic
area, the commission shall consider:
(1) the number and size of telecommunications utilities or
other persons who provide the same, equivalent, or substitutable
service in the relevant market;
(2) the extent to which the service is available in the
relevant market;
(3) the ability of customers in the relevant market to
obtain the same, equivalent, or substitutable service at comparable
rates and on comparable terms;
(4) the ability of a telecommunications utility or other
person to make the same, equivalent, or substitutable service readily
available in the relevant market at comparable rates and on
comparable terms;
(5) the proportion of the relevant market that is being
provided the service by a telecommunications utility other than the
incumbent local exchange company or holder of a certificate of
operating authority who is a dominant carrier; and
(6) other relevant information the commission considers
necessary.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 52.204. RATE FOR DEREGULATED SERVICE. If the price of a

service in a geographic market is deregulated under this subchapter,
the incumbent local exchange company or holder of a certificate of
operating authority may set the rate for the service at any level

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higher than the service's long run incremental cost.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 52.205. INVESTIGATION OF COMPETITION. (a) On request of

an incumbent local exchange company or holder of a certificate of
operating authority who is a dominant carrier made in conjunction
with an application under this subchapter, the commission shall
investigate to determine the effect and scope of competition in the
geographic and service markets at issue.
(b) The commission has the power necessary and convenient to
conduct the investigation. In conducting an investigation, the
commission may:
(1) hold a hearing;
(2) issue a subpoena to compel the attendance of a witness
and the production of a document; and
(3) make findings of fact and decisions with respect to the
markets.
(c) A party to a proceeding may use, in an application for
pricing flexibility, the results of an investigation conducted under
this section.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 52.206. REREGULATION OF MARKET. The commission, on its

own motion or on a complaint that the commission considers to have
merit, may assert regulation over a service in a geographic market
if:
(1) the incumbent local exchange company or holder of a
certificate of operating authority who was previously a dominant
carrier is found to again be dominant for the service in that
geographic market; or
(2) the provider of services under a certificate of
operating authority or service provider certificate of operating
authority is found to be dominant for the service in that geographic
market.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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Sec. 52.207. REPORTS; CONFIDENTIAL INFORMATION. (a) In

conjunction with the commission's authority to collect and compile
information, the commission may collect a report from a holder of a:
(1) certificate of operating authority; or
(2) service provider certificate of operating authority.
(b) The commission shall maintain the confidentiality of
information contained in a report collected under this section that
is claimed to be confidential for competitive purposes. The
confidential information is exempt from disclosure under Chapter 552,
Government Code.
(c) To protect the confidential information, the commission
shall aggregate the information to the maximum extent possible
considering the purpose of the proceeding.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER F. REQUIRED REPORTS AND FILINGS; RECORDS

Sec. 52.251. TARIFF FILINGS. (a) A public utility shall file
with the commission a tariff showing each rate that is:
(1) subject to the commission's jurisdiction; and
(2) in effect for a utility service, product, or commodity
offered by the utility.
(a-1) An affiliate or trade association may file the tariff
required under Subsection (a) on behalf of the public utility.
(b) The public utility, affiliate, or trade association shall
file as a part of the tariff required under Subsection (a) each rule
that relates to or affects:
(1) a rate of the utility; or
(2) a utility service, product, or commodity furnished by
the utility.
(c) The tariff filing is considered approved if the commission
does not approve or deny the tariff filing or request supplemental
information from the public utility, affiliate, or trade association
that filed the tariff before the 60th day after receiving the tariff
filing.
(d) If the commission requests supplemental information from
the public utility, affiliate, or trade association under Subsection
(c), the utility, affiliate, or association must provide the
commission with the supplemental information not later than the 15th

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day after receiving the request from the commission. If the

commission does not approve or deny the tariff filing before the 30th
day after the commission receives the supplemental information, the
tariff filing is considered approved.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2023, 88th Leg., R.S., Ch. 817 (H.B. 1597), Sec. 1, eff.
September 1, 2023.

Sec. 52.252. DEPRECIATION ACCOUNT. The commission shall

require each public utility to carry a proper and adequate
depreciation account in accordance with:
(1) the rates and methods prescribed by the commission
under Section 53.056; and
(2) any other rule the commission adopts.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 52.253. ACCOUNTS OF PROFITS AND LOSSES. A public utility

shall keep separate accounts showing profits or losses from the sale
or lease of merchandise, including an appliance, a fixture, or
equipment.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 52.255. AVAILABILITY OF RECORDS. Notwithstanding Section

14.152, a book, account, record, or memorandum of a public utility
may be removed from this state if the book, account, record, or
memorandum is returned to this state for any commission inspection
authorized by this title.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 52.256. PLAN AND REPORT OF WORKFORCE DIVERSITY AND OTHER

BUSINESS PRACTICES. (a) In this section, "small business" and
"historically underutilized business" have the meanings assigned by

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former Section 481.191, Government Code, as that section existed on

January 1, 2015.
(b) Before January 1, 2000, each telecommunications utility
shall develop and submit to the commission a comprehensive five-year
plan to enhance diversity of its workforce in all occupational
categories and for increasing opportunities for small and
historically underutilized businesses. The plan must consist of:
(1) the telecommunications utility's performance with
regard to workforce diversity and contracting with small and
historically underutilized businesses;
(2) initiatives that the telecommunications utility will
pursue in these areas over the period of the plan;
(3) a listing of programs and activities the
telecommunications utility will undertake to achieve each of these
initiatives; and
(4) a listing of the business partnership initiatives the
telecommunications utility will undertake to facilitate small and
historically underutilized business entry into the telecommunications
market, taking into account opportunities for contracting and joint
ventures.
(c) Each telecommunications utility shall submit an annual
report to the commission and the legislature relating to its efforts
to improve workforce diversity and contracting opportunities for
small and historically underutilized businesses. The report must
include:
(1) the diversity of the telecommunications utility's
workforce as of the time of the report;
(2) the telecommunications utility's level of contracting
with small and historically underutilized businesses;
(3) the specific progress made under the plan under
Subsection (b);
(4) the specific initiatives, programs, and activities
undertaken under the plan during the preceding year;
(5) an assessment of the success of each of those
initiatives, programs, and activities;
(6) the extent to which the telecommunications utility has
carried out its initiatives to facilitate opportunities for contracts
or joint ventures with small and historically underutilized
businesses; and
(7) the initiatives, programs, and activities the

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telecommunications utility will pursue during the next year to

increase the diversity of its workforce and contracting opportunities
for small and historically underutilized businesses.

Added by Acts 1999, 76th Leg., ch. 1212, Sec. 14, eff. Sept. 1, 1999.
Amended by:
Acts 2015, 84th Leg., R.S., Ch. 364 (H.B. 2667), Sec. 5, eff.
September 1, 2015.

CHAPTER 53. RATES

SUBCHAPTER A. GENERAL PROVISIONS
Sec. 53.001. AUTHORIZATION TO ESTABLISH AND REGULATE RATES.
(a) Except as otherwise provided by this title, the commission may
establish and regulate rates of a public utility and may adopt rules
for determining:
(1) the classification of customers and services; and
(2) the applicability of rates.
(b) A rule or order of the commission may not conflict with a
ruling of a federal regulatory body.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.002. COMPLIANCE WITH TITLE. A utility may not charge

or receive a rate for utility service except as provided by this
title.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.003. JUST AND REASONABLE RATES. (a) The commission

shall ensure that each rate a public utility or two or more public
utilities jointly make, demand, or receive is just and reasonable.
(b) A rate may not be unreasonably preferential, prejudicial,
or discriminatory but must be sufficient, equitable, and consistent
in application to each class of consumer.
(c) A public utility may not:
(1) grant an unreasonable preference or advantage
concerning rates to a person in a classification;
(2) subject a person in a classification to an unreasonable

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prejudice or disadvantage concerning rates; or

(3) establish or maintain an unreasonable difference
concerning rates between localities or between classes of service.
(d) In establishing a public utility's rates, the commission
may treat as a single class two or more municipalities that a public
utility serves if the commission considers that treatment to be
appropriate.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.004. EQUALITY OF RATES AND SERVICES. (a) A public

utility may not directly or indirectly charge, demand, or receive
from a person a greater or lesser compensation for a service provided
or to be provided by the utility than the compensation prescribed by
the applicable tariff filed under Section 52.251.
(b) A person may not knowingly receive or accept a service from
a public utility for a compensation greater or less than the
compensation prescribed by the tariff.
(c) This title does not prevent a cooperative corporation from
returning to its members net earnings resulting from its operations
in proportion to the members' purchases from or through the
corporation.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.005. RATES FOR AREA NOT IN MUNICIPALITY. Without the

approval of the commission, a public utility's rates for an area not
in a municipality may not exceed 115 percent of the average of all
rates for similar services for all municipalities served by the same
utility in the same county as that area.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.006. BURDEN OF PROOF. (a) In a proceeding involving a

proposed rate change, the public utility has the burden of proving
that:
(1) the rate change is just and reasonable, if the utility
proposes the change; or

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(2) an existing rate is just and reasonable, if the

proposal is to reduce the rate.
(b) In a proceeding in which the rate of an incumbent local
exchange company is in issue, the incumbent local exchange company
has the burden of proving that the rate is just and reasonable.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.007. LIMIT ON RECONNECTION FEE. The commission shall

establish a reasonable limit on the amount that a local exchange
company may charge a customer for changing the location at which the
customer receives service.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER B. COMPUTATION OF RATES

Sec. 53.051. ESTABLISHING OVERALL REVENUES. In establishing a
public utility's rates, the commission shall establish the utility's
overall revenues at an amount that will permit the utility a
reasonable opportunity to earn a reasonable return on the utility's
invested capital used and useful in providing service to the public
in excess of the utility's reasonable and necessary operating
expenses.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.052. ESTABLISHING REASONABLE RETURN. In establishing a

reasonable return on invested capital, the commission shall consider
applicable factors, including:
(1) the quality of the utility's services;
(2) the efficiency of the utility's operations; and
(3) the quality of the utility's management.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.053. COMPONENTS OF INVESTED CAPITAL. (a) Public

utility rates shall be based on the original cost, less depreciation,

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of property used by and useful to the utility in providing service.

(b) The original cost of property shall be determined at the
time the property is dedicated to public use, whether by the utility
that is the present owner or by a predecessor.
(c) In this section, "original cost" means the actual money
cost or the actual money value of consideration paid other than
money.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.054. CONSTRUCTION WORK IN PROGRESS. (a) Construction

work in progress, at cost as recorded on the public utility's books,
may be included in the utility's rate base. The inclusion of
construction work in progress is an exceptional form of rate relief
that the commission may grant only if the utility demonstrates that
inclusion is necessary to the utility's financial integrity.
(b) Construction work in progress may not be included in the
rate base for a major project under construction to the extent that
the project has been inefficiently or imprudently planned or managed.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.055. SEPARATIONS AND ALLOCATIONS. Costs of facilities,

revenues, expenses, taxes, and reserves shall be separated or
allocated as prescribed by the commission.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.056. DEPRECIATION, AMORTIZATION, AND DEPLETION. (a)

The commission shall establish proper and adequate rates and methods
of depreciation, amortization, or depletion for each class of
property of a public utility.
(b) On application of a utility, the commission shall establish
depreciation rates that promote the use of new technology and
infrastructure. In establishing rates under this subsection, the
commission shall consider depreciation practices of nonregulated
telecommunications providers.
(c) The rates and methods established under this section and

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the depreciation account required by Section 52.252 shall be used

uniformly and consistently throughout rate-setting and appeal
proceedings.
(d) Notwithstanding this section, a company electing under
Chapter 58 may determine its own depreciation rates and
amortizations. The company shall notify the commission of any change
in those rates or amortizations.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.057. NET INCOME; DETERMINATION OF REVENUES AND

EXPENSES. (a) A public utility's net income is the total revenues
of the utility less all reasonable and necessary expenses as
determined by the commission.
(b) The commission shall determine revenues and expenses in a
manner consistent with this subchapter.
(c) The commission may adopt reasonable rules with respect to
whether an expense is allowed for ratemaking purposes.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.058. CONSIDERATION OF PAYMENT TO AFFILIATE. (a)

Except as provided by Subsection (b), the commission may not allow as
capital cost or as expense a payment to an affiliate for:
(1) cost of a service, property, right, or other item; or
(2) interest expense.
(b) The commission may allow a payment described by Subsection
(a) only to the extent that the commission finds the payment is
reasonable and necessary for each item or class of items as
determined by the commission.
(c) A finding under Subsection (b) must include:
(1) a specific finding of the reasonableness and necessity
of each item or class of items allowed; and
(2) except as provided by Subsection (d), a finding that
the price to the utility is not higher than the prices charged by the
supplying affiliate to:
(A) its other affiliates or divisions for the same item
or class of items; or
(B) a nonaffiliated person within the same market area

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or having the same market conditions.

(d) A finding under this section is not required as to the
prices charged by the supplying affiliate to its other affiliates or
divisions if the supplying affiliate computed its charges to the
utility in a manner consistent with Federal Communications Commission
rules.
(e) If the commission finds that the affiliate expense for the
test period is unreasonable, the commission shall:
(1) determine the reasonable level of the expense; and
(2) include that expense in determining the utility's cost
of service.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.059. TREATMENT OF CERTAIN TAX BENEFITS. (a) In

determining the allocation of tax savings derived from liberalized
depreciation and amortization, the investment tax credit, and the
application of similar methods, the commission shall:
(1) balance equitably the interests of present and future
customers; and
(2) apportion accordingly the benefits between consumers
and the public utility.
(b) If a public utility retains a portion of the investment tax
credit, that portion shall be deducted from the original cost of the
facilities or other addition to the rate base to which the credit
applied to the extent allowed by the Internal Revenue Code.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.060. COMPUTATION OF INCOME TAX; CONSOLIDATED RETURN.

(a) Unless it is shown to the satisfaction of the commission that it
was reasonable to choose not to consolidate returns, a public
utility's income taxes shall be computed as though a consolidated
return had been filed and the utility had realized its fair share of
the savings resulting from that return, if:
(1) the utility is a member of an affiliated group eligible
to file a consolidated income tax return; and
(2) it is advantageous to the utility to do so.
(b) The amount of income tax that a consolidated group of which

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a public utility is a member saves, because the consolidated return

eliminates the intercompany profit on purchases by the utility from
an affiliate, shall be applied to reduce the cost of the property or
service purchased from the affiliate.
(c) The investment tax credit allowed against federal income
taxes, to the extent retained by the utility, shall be applied as a
reduction in the rate-based contribution of the assets to which the
credit applies, to the extent and at the rate allowed by the Internal
Revenue Code.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.061. ALLOWANCE OF CERTAIN EXPENSES. (a) The

commission may not allow as a cost or expense for ratemaking
purposes:
(1) an expenditure for legislative advocacy; or
(2) an expenditure described by Section 52.254 that the
commission determines to be not in the public interest.
(b) The commission may allow as a cost or expense reasonable
charitable or civic contributions not to exceed the amount approved
by the commission.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.062. CONSIDERATION OF CERTAIN EXPENSES. The commission

may not consider for ratemaking purposes:
(1) an expenditure for legislative advocacy, made directly
or indirectly, including legislative advocacy expenses included in
trade association dues;
(2) an expenditure for costs of processing a refund or
credit under Section 53.110; or
(3) any other expenditure, including an executive salary,
advertising expense, legal expense, or civil penalty or fine the
commission finds to be unreasonable, unnecessary, or not in the
public interest.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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Sec. 53.063. CONSIDERATION OF PROFIT OR LOSS FROM SALE OR LEASE

OF MERCHANDISE. In establishing a public utility's rates, the
commission may not consider a profit or loss that results from the
sale or lease of merchandise, including appliances, fixtures, or
equipment, to the extent that merchandise is not integral to
providing utility service.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.064. SELF-INSURANCE. (a) A public utility may self-

insure all or part of the utility's potential liability or
catastrophic property loss, including windstorm, fire, and explosion
losses, that could not have been reasonably anticipated and included
under operating and maintenance expenses.
(b) The commission shall approve a self-insurance plan under
this section if the commission finds that:
(1) the coverage is in the public interest;
(2) the plan, considering all costs, is a lower cost
alternative to purchasing commercial insurance; and
(3) ratepayers will receive the benefits of the savings.
(c) In computing a utility's reasonable and necessary expenses
under this subchapter, the commission, to the extent the commission
finds is in the public interest, shall allow as a necessary expense
money credited to a reserve account for self-insurance. The
commission shall determine reasonableness under this subsection:
(1) from information provided at the time the self-
insurance plan and reserve account are established; and
(2) on the filing of a rate case by a utility that has a
reserve account.
(d) After a reserve account for self-insurance is established,
the commission shall:
(1) determine whether the account has a surplus or shortage
under Subsection (e); and
(2) subtract any surplus from or add any shortage to the
utility's rate base.
(e) A surplus in the reserve account exists if the charges
against the account are less than the money credited to the account.
A shortage in the reserve account exists if the charges against the
account are greater than the money credited to the account.

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(f) The commission shall adopt rules governing self-insurance

under this section.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.065. INTEREXCHANGE SERVICES; RATES OF INCUMBENT LOCAL

EXCHANGE COMPANY. (a) An incumbent local exchange company's rates
for interexchange telecommunications services must be statewide
average rates except as ordered by the commission after application
and hearing.
(b) Repealed by Acts 2011, 82nd Leg., R.S., Ch. 98, Sec. 21(2),
eff. September 1, 2011.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2011, 82nd Leg., R.S., Ch. 21 (S.B. 983), Sec. 4, eff.
September 1, 2011.
Acts 2011, 82nd Leg., R.S., Ch. 98 (S.B. 980), Sec. 21(2), eff.
September 1, 2011.

SUBCHAPTER C. GENERAL PROCEDURES FOR RATE CHANGE PROPOSED BY UTILITY

Sec. 53.101. DEFINITION. In this subchapter, "major change"
means an increase in rates that would increase the aggregate revenues
of the applicant more than the greater of $100,000 or 2-1/2 percent.
The term does not include an increase in rates that the commission
allows to go into effect or the utility makes under an order of the
commission after hearings held with public notice.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.102. STATEMENT OF INTENT TO CHANGE RATES. (a) A

utility may not change its rates unless the utility files a statement
of its intent with the commission at least 35 days before the
effective date of the proposed change.
(b) The utility shall also mail or deliver a copy of the
statement of intent to the appropriate officer of each affected
municipality.
(c) The statement of intent must include:

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(1)
proposed revisions of tariffs; and
(2)
a detailed statement of:
(A) each proposed change;
(B) the effect the proposed change is expected to have
on the revenues of the utility;
(C) each class and number of utility consumers
affected; and
(D) any other information required by the commission's
rules.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.103. NOTICE OF INTENT TO CHANGE RATES. (a) The

utility shall:
(1) publish, in conspicuous form and place, notice to the
public of the proposed change once each week for four successive
weeks before the effective date of the proposed change in a newspaper
having general circulation in each county containing territory
affected by the proposed change; and
(2) mail notice of the proposed change to any other
affected person as required by the commission's rules.
(b) The commission may waive the publication of notice
requirement prescribed by Subsection (a) in a proceeding that
involves only a rate reduction for each affected ratepayer. The
applicant shall give notice of the proposed rate change by mail to
each affected utility customer.
(c) The commission by rule shall define other proceedings for
which the publication of notice requirement prescribed by Subsection
(a) may be waived on a showing of good cause. A waiver may not be
granted in a proceeding involving a rate increase to any class or
category of ratepayer.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.104. EARLY EFFECTIVE DATE OF RATE CHANGE. (a) For

good cause shown, the commission may allow a rate change, other than
a major change, to take effect:
(1) before the end of the 35-day period prescribed by
Section 53.102; and

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(2) under conditions the commission prescribes, subject to

suspension as provided by this subchapter.
(b) The utility shall immediately revise its tariffs to include
the change.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.105. DETERMINATION OF PROPRIETY OF CHANGE; HEARING.

(a) If a tariff changing rates is filed with the commission, the
commission shall, on complaint by an affected person, or may, on its
own motion, not later than the 30th day after the effective date of
the change, enter on a hearing to determine the propriety of the
change.
(b) The commission shall hold a hearing in every case in which
the change constitutes a major change. The commission may, however,
use an informal proceeding if the commission does not receive a
complaint before the 46th day after the date notice of the change is
filed.
(c) The commission shall give reasonable notice of the hearing,
including notice to the governing body of each affected municipality
and county. The utility is not required to provide a formal answer
or file any other formal pleading in response to the notice, and the
absence of an answer does not affect an order for a hearing.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.106. REGIONAL HEARING. The commission shall hold a

regional hearing at an appropriate location in a case in which the
commission determines it is in the public interest to hear testimony
at a regional hearing for inclusion in the record.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.107. PREFERENCE TO HEARING. The commission shall:

(1) give preference to a hearing under this subchapter and
to deciding questions arising under this subchapter and Subchapter E
over any other question pending before it; and
(2) decide the questions as quickly as possible.

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Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.108. RATE SUSPENSION; DEADLINE. (a) Pending the

hearing and a decision, the commission, after delivering to the
utility a written statement of the commission's reasons, may suspend
the rate change for not longer than 150 days after the date the rate
change would otherwise be effective.
(b) The 150-day period prescribed by Subsection (a) shall be
extended two days for each day the actual hearing on the merits of
the case exceeds 15 days.
(c) If the commission does not make a final determination
concerning a rate change before expiration of the suspension period,
the commission is considered to have approved the change. This
approval is subject to the authority of the commission thereafter to
continue a hearing in progress.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.109. TEMPORARY RATES. (a) The commission may

establish temporary rates to be in effect during the suspension
period under Section 53.108.
(b) If the commission does not establish temporary rates, the
rates in effect when the suspended tariff was filed continue in
effect during the suspension period.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.110. BONDED RATES. (a) A utility may put a changed

rate into effect by filing a bond with the commission if:
(1) the 150-day suspension period has been extended under
Section 53.108(b); and
(2) the commission fails to make a final determination
before the 151st day after the date the rate change would otherwise
be effective.
(b) The bonded rate may not exceed the proposed rate.
(c) The bond must be:
(1) payable to the commission in an amount, in a form, and
with a surety approved by the commission; and

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(2) conditioned on refund.

(d) The utility shall refund or credit against future bills:
(1) money collected under the bonded rates in excess of the
rate finally ordered; and
(2) interest on that money, at the current interest rate as
determined by the commission.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.111. ESTABLISHMENT OF FINAL RATES. (a) If, after

hearing, the commission finds the rates are unreasonable or in
violation of law, the commission shall:
(1) enter an order establishing the rates the utility shall
charge or apply for the service in question; and
(2) serve a copy of the order on the utility.
(b) The rates established in the order shall be observed
thereafter until changed as provided by this title.
(c) This section does not apply to a company electing under
Chapter 58 or 59 except as otherwise provided by those chapters or by
Chapter 60.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.112. EXPIRATION OF SUSPENSION; EFFECT ON CERTAIN

RATES. (a) Notwithstanding Section 53.111(a), if the commission
does not make a final determination concerning an incumbent local
exchange company's rate change before expiration of the 150-day
suspension period, the rates finally approved by the commission take
effect on and the incumbent local exchange company is entitled to
collect those rates from the date the 150-day suspension period
expired.
(b) A surcharge or other charge necessary to effectuate this
section may not be recovered over a period of less than 90 days from
the date of the commission's final order.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.113. FCC-APPROVED TARIFFS FOR SWITCHED-ACCESS SERVICE.

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(a) An incumbent local exchange company may file with the commission
tariffs for switched-access service that have been approved by the
Federal Communications Commission. The tariffs must include all rate
elements in the company's interstate access tariff other than end-
user charges.
(b) Not later than the 60th day after the date a company files
tariffs under Subsection (a), the commission shall order the rates
and terms to be the incumbent local exchange company's intrastate
switched-access rates and terms if, on review, the tariffs contain
the same rates and terms, excluding end-user charges, as approved by
the Federal Communications Commission.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER D. RATE CHANGES PROPOSED BY COMMISSION

Sec. 53.151. UNREASONABLE OR VIOLATIVE EXISTING RATES. (a) If
the commission, on its own motion or on complaint by an affected
person, after reasonable notice and hearing, finds that the existing
rates of a public utility for a service are unreasonable or in
violation of law, the commission shall:
(1) enter an order establishing the just and reasonable
rates to be observed thereafter, including maximum or minimum rates;
and
(2) serve a copy of the order on the utility.
(b) The rates established under Subsection (a) constitute the
legal rates of the public utility until changed as provided by this
title.
(c) This section does not apply to a company electing under
Chapter 58 or Chapter 59 except as otherwise provided by those
chapters.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.152. INVESTIGATING COSTS OF OBTAINING SERVICE FROM

ANOTHER SOURCE. If a public utility does not produce or generate the
service that it distributes, transmits, or furnishes to the public
for compensation but obtains the service from another source, the
commission may investigate the cost of that production or generation
in an investigation of the reasonableness of the utility's rates.

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Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER E. COST RECOVERY AND RATE ADJUSTMENTS

Sec. 53.201. AUTOMATIC ADJUSTMENT FOR CHANGE IN COSTS
PROHIBITED. The commission may not establish a rate or tariff that
authorizes a utility to automatically adjust and pass through to the
utility's customers a change in the utility's costs.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER F. REGULATORY POLICY FOR SMALL INCUMBENT LOCAL EXCHANGE

COMPANIES AND COOPERATIVES
Sec. 53.251. GENERAL POLICY. Regulatory policy should
recognize that:
(1) there are differences between small and large incumbent
local exchange companies;
(2) there are a large number of customer-owned telephone
cooperatives and small, locally owned investor companies; and
(3) it is appropriate to provide incentives and flexibility
to allow an incumbent local exchange company that serves a rural area
to:
(A) provide existing services; and
(B) introduce new technology and new services in a
prompt, efficient, and economical manner.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.252. ADOPTION OF CERTAIN POLICIES. Notwithstanding any

other provision of this title, the commission shall consider and may
adopt policies to:
(1) provide for evaluation of the overall reasonableness of
the rates of a rural or small incumbent local exchange company or
cooperative not more frequently than once every three years;
(2) permit consideration of future construction plans and
operational changes in evaluating the reasonableness of the rates of
a rural or small incumbent local exchange company or cooperative; or
(3) allow a rural or small incumbent local exchange company
or cooperative to:

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(A) provide required information by report or by other

means, as necessary, including a required rate filing package, in
substantially less burdensome and complex form than is required of a
larger incumbent local exchange company;
(B) change depreciation and amortization rates, if
customer rates are not affected, after notice to the commission,
subject to commission review in a proceeding under Subchapter C or
Subchapter D;
(C) adopt for a new service the rates for the same or a
substantially similar service offered by a larger incumbent local
exchange company, without additional cost justification; and
(D) submit to the commission, instead of a management
audit otherwise required by law, policy, or rule, financial audits
regularly performed by an independent auditor or required and
performed as a result of the company's or cooperative's participation
in a federal or state financing or revenue-sharing program.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER G. SPECIAL PROCEDURES FOR SMALL LOCAL EXCHANGE COMPANIES

AND COOPERATIVES
Sec. 53.301. DEFINITION. (a) In this subchapter, "minor
change" means a change, including the restructuring of rates of
existing services, that:
(1) decreases the rates or revenues of an incumbent local
exchange company; or
(2) together with any other rate change or approved tariff
changes in the 12 months preceding the effective date of the proposed
change, increases the company's total regulated intrastate gross
annual revenues by not more than five percent.
(b) With regard to a change to a basic local access line rate,
a "minor change" does not include a change that, together with any
other change to the basic local access line rate that took effect
during the 12 months preceding the effective date of the proposed
change, results in an increase of more than 50 percent.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2011, 82nd Leg., R.S., Ch. 118 (H.B. 2680), Sec. 1, eff.
September 1, 2011.

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Sec. 53.302. APPLICABILITY. This subchapter does not apply to

an incumbent local exchange company that is a cooperative corporation
partially deregulated under Subchapter H.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.303. PROVISIONS NOT EXCLUSIVE. This subchapter does

not prohibit:
(1) an incumbent local exchange company from filing for a
new service or rate change under another section of this title; or
(2) the commission from conducting a review under
Subchapter D.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.304. PROCEDURE TO OFFER CERTAIN SERVICES OR MAKE MINOR

CHANGES. (a) An incumbent local exchange company may offer an
extended local calling service, a packaged service, or a new or
promotional service on an optional basis or make a minor change in
its rates or tariffs if the company:
(1) is a cooperative corporation or has, together with all
affiliated incumbent local exchange companies, fewer than 31,000
access lines in service in this state;
(2) files with the commission and the office notice, as
prescribed by Subsection (b), not later than the 10th day before the
effective date of the proposed change;
(3) provides notice as prescribed by Section 53.305; and
(4) files with the commission affidavits verifying that
notice as prescribed by Section 53.305 was provided.
(b) The notice must include:
(1) a copy of a resolution adopted by the incumbent local
exchange company's board of directors approving the proposed change;
(2) a description of the services affected by the proposed
change;
(3) a copy of the proposed tariff for the affected service;
(4) a copy of the customer notice required by Subsection
(a)(3);

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(5) the number of access lines the company and each

affiliate have in service in this state; and
(6) the amount by which the company's total regulated
intrastate gross annual revenues will increase or decrease as a
result of the proposed change.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2011, 82nd Leg., R.S., Ch. 118 (H.B. 2680), Sec. 2, eff.
September 1, 2011.

Sec. 53.305. NOTICE TO AFFECTED CUSTOMERS. (a) A company

shall provide notice of a proposed change to affected customers in
the manner prescribed by the commission.
(b) Notice must:
(1) be provided not later than the 10th day before the
effective date of the proposed change; and
(2) include:
(A) a description of the services affected by the
proposed change;
(B) the effective date of the proposed change;
(C) an explanation of the customer's right to petition
the commission for a review under Section 53.306, including the
number of persons required to petition before a commission review
will occur;
(D) an explanation of the customer's right to
information concerning how to obtain a copy of the proposed tariff
from the company;
(E) the amount by which the company's total regulated
intrastate gross annual revenues will increase or decrease as a
result of the proposed change; and
(F) a list of rates that are affected by the proposed
rate change.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2011, 82nd Leg., R.S., Ch. 118 (H.B. 2680), Sec. 3, eff.
September 1, 2011.

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Sec. 53.306. COMMISSION REVIEW OF PROPOSED CHANGE. (a) The

commission shall review a proposed change filed under this subchapter
if:
(1) the commission receives complaints relating to the
proposed change signed by a number of affected local service
customers equal at least to the lesser of 1,500 or five percent of
those customers;
(2) the commission receives a complaint relating to the
proposed change from an affected intrastate access customer, or a
group of affected intrastate access customers, that in the preceding
12 months accounted for more than 10 percent of the company's total
intrastate gross access revenues;
(3) the proposed change is not a minor change;
(4) the company does not comply with the procedural
requirements of this subchapter; or
(5) the proposed change is inconsistent with the
commission's substantive policies as expressed in its rules.
(b) The commission may suspend a tariff proposed under this
subchapter during the review.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.307. COMPLIANCE WITH PRINCIPLES; REDUCED RATES. A

rate established under this subchapter must be in accordance with the
rate-setting principles of this chapter, except that a company may
provide to its board members, officers, employees, or agents free or
reduced rates for services.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.308. FEES AND ASSESSMENTS. The commission may

prescribe and collect a fee or assessment from incumbent local
exchange companies necessary to recover the cost to the commission
and to the office of activities carried out and services provided
under:
(1) this subchapter;
(2) Section 53.112;
(3) Subchapter H; and
(4) Section 55.004.

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Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER H. PARTIAL DEREGULATION AVAILABLE TO CERTAIN COOPERATIVE

CORPORATIONS
Sec. 53.351. PROVISIONS NOT EXCLUSIVE. (a) This subchapter
does not:
(1) prohibit a cooperative from filing for a new service or
a rate change under another applicable provision of this title; or
(2) affect the application of a provision of this title not
directly related to:
(A) establishing rates; or
(B) the authority of the commission to require a
cooperative to file a report required under this title or the
commission's rules.
(b) Notwithstanding any other provision of this subchapter, the
commission may conduct a review under Subchapter D.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.352. PARTIAL DEREGULATION BY BALLOT. (a) An incumbent

local exchange company that is a cooperative corporation may vote to
partially deregulate the cooperative by sending a ballot to each
cooperative member. The incumbent local exchange company may include
the ballot in a bill or send the ballot separately. The ballot shall
be printed to permit voting for or against the proposition:
"Authorizing the partial deregulation of the (name of the
cooperative)."
(b) The cooperative is partially deregulated if a majority of
the ballots returned to the cooperative not later than the 45th day
after the date the ballots are mailed favor deregulation.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.353. VOTING PROCEDURES. The commission by rule shall

prescribe the voting procedures a cooperative must use under this
subchapter.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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Sec. 53.354. PROCEDURE TO OFFER CERTAIN SERVICES OR MAKE

CERTAIN CHANGES. After the initial balloting, a cooperative may
offer extended local calling services, offer new services on an
optional basis, or make changes in its rates or tariffs if the
cooperative:
(1) files a statement of intent under Section 53.355;
(2) provides notice of the proposed action to each customer
and municipality as prescribed by Section 53.356; and
(3) files with the commission affidavits verifying that
notice was provided as prescribed by Section 53.357.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.355. STATEMENT OF INTENT. (a) A cooperative must file

a statement of intent to use this subchapter with the commission and
the office not later than the 61st day before the effective date of
the proposed change.
(b) The statement must include:
(1) a copy of a resolution, signed by a majority of the
members of the cooperative's board of directors, approving the
proposed action and authorizing the filing of the statement of
intent;
(2) a description of the services affected by the proposed
action;
(3) a copy of the proposed tariff for the affected service;
and
(4) a copy of the customer notice required by Section
53.356.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.356. NOTICE TO AFFECTED PERSONS. (a) The cooperative

shall provide to each affected customer or party, including a
municipality, at least two notices of the proposed action by bill
insert or by individual notice.
(b) The cooperative shall provide:
(1) the first notice not later than the 61st day before the

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effective date of the proposed action; and

(2) the last notice not later than the 31st day before the
effective date of the proposed action.
(c) A notice prescribed by this section must include:
(1) a description of the services affected by the proposed
action;
(2) the effective date of the proposed action;
(3) an explanation of the customer's right to:
(A) obtain a copy of the proposed tariff from the
cooperative; and
(B) petition the commission for a review under Section
53.358;
(4) a statement of the amount by which the cooperative's
total gross annual revenues will increase or decrease and a statement
explaining the effect on the cooperative revenues as a result of the
proposed action; and
(5) a list of rates that are affected by the proposed rate
action, showing the effect of the proposed action on each of those
rates.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.357. FILING OF AFFIDAVITS VERIFYING NOTICE. Not later

than the 15th day before the effective date of a proposed action, the
cooperative shall file with the commission affidavits that verify
that the cooperative provided each notice required by Section 53.356.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.358. COMMISSION REVIEW OF PROPOSED ACTION. (a) The

commission shall review a proposed action filed under this subchapter
if:
(1) the commission receives, not later than the 45th day
after the date the first notice is provided under Section 53.356,
complaints relating to the proposed action:
(A) signed by at least five percent of the affected
local service customers; or
(B) from an affected intrastate access customer, or
group of affected intrastate access customers, that in the preceding

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12 months accounted for more than 10 percent of the cooperative's

total intrastate access revenues;
(2) the cooperative does not comply with the procedural
requirements of this subchapter; or
(3) the proposed action is inconsistent with the
commission's substantive policies as expressed in its rules.
(b) If the commission conducts a review of the proposed action
under this section before the action's effective date, the commission
may suspend the proposed action during the review.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.359. REVERSAL OF DEREGULATION BY BALLOT. (a) A

cooperative that is partially deregulated under this subchapter may
vote to reverse the deregulation by sending a ballot to each
cooperative member.
(b) The cooperative's board of directors may order reballoting
on its own motion. If the board receives a written request for that
action from at least 10 percent of its members, the board shall
reballot not later than the 60th day after the date the board
receives that request.
(c) The cooperative may include the ballot in a bill or send
the ballot separately. The ballot shall be printed to permit voting
for or against the proposition: "Reversing the partial deregulation
of the (name of the cooperative)."
(d) The partial deregulation is reversed if a majority of the
ballots returned to the cooperative not later than the 45th day after
the date the ballots are mailed favor reversal.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

CHAPTER 54. CERTIFICATES

SUBCHAPTER A. GENERAL PROVISIONS
Sec. 54.001. CERTIFICATE REQUIRED. A person may not provide
local exchange telephone service, basic local telecommunications
service, or switched access service unless the person obtains a:
(1) certificate of convenience and necessity;
(2) certificate of operating authority; or
(3) service provider certificate of operating authority.

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Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 54.002. EXCEPTIONS TO CERTIFICATE REQUIREMENT FOR SERVICE

EXTENSION. (a) A telecommunications utility is not required to
obtain a certificate of convenience and necessity, a certificate of
operating authority, or a service provider certificate of operating
authority for an:
(1) extension into territory that is:
(A) contiguous to the territory the telecommunications
utility serves;
(B) not receiving similar service from another
telecommunications utility; and
(C) not in another telecommunications utility's
certificated area;
(2) extension in or to territory the telecommunications
utility serves or is authorized to serve under a certificate of
public convenience and necessity, a certificate of operating
authority, or a service provider certificate of operating authority;
or
(3) operation, extension, or service in progress on
September 1, 1975.
(b) An extension allowed by Subsection (a) is limited to a
device used:
(1) to interconnect existing facilities; or
(2) solely to transmit telecommunications utility services
from an existing facility to a customer of retail utility service.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 54.003. EXCEPTIONS TO CERTIFICATE REQUIREMENT FOR CERTAIN

SERVICES. A telecommunications utility is not required to obtain a
certificate of convenience and necessity, a certificate of operating
authority, or a service provider certificate of operating authority
for:
(1) an interexchange telecommunications service;
(2) a nonswitched private line service;
(3) a shared tenant service;
(4) a specialized communications common carrier service;

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 UTILITIES CODE

(5) a commercial mobile service; or

(6) an operator service as defined by Section 55.081.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 54.004. RELINQUISHMENT PLAN. A holder of a service

provider certificate of operating authority who applies for a
certificate of operating authority or a certificate of convenience
and necessity for the same territory must include with the
application a plan to relinquish the service provider certificate of
operating authority.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 54.005. NOTICE OF AND HEARING ON APPLICATION. (a) When

an application for a certificate of convenience and necessity, a
certificate of operating authority, or a service provider certificate
of operating authority is filed, the commission shall:
(1) give notice of the application to interested parties;
and
(2) if requested:
(A) set a time and place for a hearing; and
(B) give notice of the hearing.
(b) A person interested in the application may intervene at the
hearing.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 54.006. REQUEST FOR PRELIMINARY ORDER. (a) A

telecommunications utility that wants to exercise a right or
privilege under a franchise or permit that the utility anticipates
obtaining but has not been granted may apply to the commission for a
preliminary order under this section.
(b) The commission may issue a preliminary order declaring that
the commission, on application and under commission rules, will grant
the requested certificate of convenience and necessity, certificate
of operating authority, or service provider certificate of operating
authority, on terms the commission designates, after the

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telecommunications utility obtains the franchise or permit.

(c) The commission shall grant the certificate on presentation
of evidence satisfactory to the commission that the
telecommunications utility has obtained the franchise or permit.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 54.007. FLEXIBILITY PLAN. (a) After the commission

grants an application for a certificate of convenience and necessity,
a certificate of operating authority, or a service provider
certificate of operating authority or determines that a certificate
is not needed for the applicant to provide the relevant services, the
commission shall conduct appropriate proceedings to establish a
transitional flexibility plan for the incumbent local exchange
company in the same area or areas as the new certificate holder.
(b) A basic local telecommunications service price of the
incumbent local exchange company may not be increased before the
fourth anniversary of the date the certificate is granted to the
applicant except that the price may be increased as provided by this
title.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 1212, Sec. 15, eff. Sept. 1, 1999.

Sec. 54.008. REVOCATION OR AMENDMENT OF CERTIFICATE. (a) The

commission may revoke or amend a certificate of convenience and
necessity, a certificate of operating authority or a service provider
certificate of operating authority after notice and hearing if the
commission finds that the certificate holder has never provided or is
no longer providing service in all or any part of the certificated
area.
(b) The commission may require one or more public utilities to
provide service in an area affected by the revocation or amendment of
a certificate held by a public utility.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER B. CERTIFICATE OF CONVENIENCE AND NECESSITY

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Sec. 54.051. DEFINITION. In this subchapter, "certificate"

means a certificate of convenience and necessity.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 54.052. CERTIFICATE REQUIRED FOR PUBLIC UTILITY. (a) A

public utility may not directly or indirectly provide service to the
public under a franchise or permit unless the utility first obtains
from the commission a certificate that states that the public
convenience and necessity requires or will require the installation,
operation, or extension of the service.
(b) Except as otherwise provided by this chapter, a public
utility may not furnish or make available retail public utility
service to an area in which retail utility service is being lawfully
furnished by another public utility unless the utility first obtains
a certificate that includes the area in which the consuming facility
is located.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 54.053. APPLICATION FOR CERTIFICATE. (a) A public

utility that wants to obtain or amend a certificate must submit an
application to the commission.
(b) The applicant shall file with the commission evidence the
commission requires to show the applicant has received the consent,
franchise, or permit required by the proper municipal or other public
authority.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 54.054. GRANT OR DENIAL OF CERTIFICATE. (a) The

commission may approve an application and grant a certificate only if
the commission finds that the certificate is necessary for the
service, accommodation, convenience, or safety of the public.
(b) The commission may:
(1) grant the certificate as requested;
(2) grant the certificate for the construction of a portion
of the requested system, facility, or extension or the partial

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exercise of the requested right or privilege; or

(3) refuse to grant the certificate.
(c) The commission shall grant each certificate on a
nondiscriminatory basis after considering:
(1) the adequacy of existing service;
(2) the need for additional service;
(3) the effect of granting the certificate on the recipient
of the certificate and any public utility of the same kind serving
the proximate area; and
(4) other factors, such as:
(A) community values;
(B) recreational and park areas;
(C) historical and aesthetic values;
(D) environmental integrity; and
(E) the probable improvement of service or lowering of
cost to consumers in the area if the certificate is granted.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER C. CERTIFICATE OF OPERATING AUTHORITY

Sec. 54.101. DEFINITION. In this subchapter, "certificate"
means a certificate of operating authority.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 1212, Sec. 16, eff. Sept. 1, 1999.

Sec. 54.102. APPLICATION FOR CERTIFICATE. (a) A person may

apply for a certificate of operating authority.
(b) The applicant must file with the application a sworn
statement that the applicant has applied for each municipal consent,
franchise, or permit required for the type of services and facilities
for which the applicant has applied.
(c) An affiliate of a person holding a certificate of
convenience and necessity may hold a certificate of operating
authority if the holder of the certificate of convenience and
necessity is in compliance with federal law and Federal
Communications Commission rules governing affiliates and structural
separation. An affiliate of a person holding a certificate of
convenience and necessity may not directly or indirectly sell to a

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non-affiliate any regulated product or service purchased from the

person holding a certificate of convenience and necessity at any rate
or price less than the price paid to the person holding a certificate
of convenience and necessity.
(d) A person may hold a certificate for all or any portion of a
service area for which one or more affiliates of the person holds a
certificate of operating authority, a service provider certificate of
operating authority, or a certificate of convenience and necessity.
(e) An affiliate of a company that holds a certificate of
convenience and necessity and that serves more than five million
access lines in this state may hold a certificate of operating
authority or service provider certificate of operating authority to
provide service in an area of this state in which its affiliated
company is the incumbent local exchange company. However, the
affiliate holding the certificate of operating authority or service
provider certificate of operating authority may not provide in that
area any service listed in Sections 58.051(a)(1)-(4) or Sections
58.151(1)-(4), or any subset of those services, in a manner that
results in a customer-specific contract so long as the affiliated
company that is the incumbent local exchange company may not provide
those services or subsets of services in a manner that results in a
customer-specific contract under Section 58.003 in that area. This
subsection does not preclude an affiliate of a company holding a
certificate of convenience and necessity from holding a certificate
of operating authority in any area of this state to provide advanced
services as defined by rules or orders of the Federal Communications
Commission, or preclude such an advanced services affiliate from
using any form of pricing flexibility, with regard to services other
than those subject to the restrictions provided by this subsection.
This subsection does not preclude a long distance affiliate from
using any form of pricing flexibility with regard to services other
than those services subject to the restrictions provided by this
subsection. In addition, the affiliate holding the certificate of
operating authority or service provider certificate of operating
authority may not offer, in an area for which the affiliated
incumbent local exchange company holds a certificate of convenience
and necessity, a service listed in Sections 58.151(1)-(4) as a
component of a package of services, as a promotional offering, or
with a volume or term discount until the affiliated incumbent local
exchange company may offer those services in pricing flexibility

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offerings in accordance with Section 58.004, unless the customer of

one of these pricing flexibility offerings is a federal, state, or
local governmental entity.
(f) The commission has the authority to enforce this section.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 1212, Sec. 16, eff. Sept. 1, 1999.

Sec. 54.103. GRANT OR DENIAL OF CERTIFICATE. (a) The

commission must grant or deny a certificate not later than the 60th
day after the date the application for the certificate is filed. The
commission may extend the deadline on good cause shown.
(b) The commission shall grant each certificate on a
nondiscriminatory basis after considering factors such as:
(1) the technical and financial qualifications of the
applicant; and
(2) the applicant's ability to meet the commission's
quality of service requirements.
(c) In an exchange of an incumbent local exchange company that
serves fewer than 31,000 access lines, in addition to the factors
described by Subsection (b), the commission shall consider:
(1) the effect of granting the certificate on a public
utility serving the area and on that utility's customers;
(2) the ability of that public utility to provide adequate
service at reasonable rates;
(3) the effect of granting the certificate on the ability
of that public utility to act as the provider of last resort; and
(4) the ability of the exchange, not the company, to
support more than one provider of service.
(d) Except as provided by Subsections (e) and (f), the
commission may grant an application for a certificate only for an
area or areas that are contiguous and reasonably compact and cover an
area of at least 27 square miles.
(e) In an exchange in a county that has a population of less
than 500,000 and that is served by an incumbent local exchange
company that has more than 31,000 access lines, an area covering less
than 27 square miles may be approved if the area is contiguous and
reasonably compact and has at least 20,000 access lines.
(f) In an exchange of a company that serves fewer than 31,000

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access lines in this state, the commission may grant an application

only for an area that has boundaries similar to the boundaries of the
serving central office that is served by the incumbent local exchange
company that holds the certificate of convenience and necessity for
the area.
(g) Expired.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 1212, Sec. 16, eff. Sept. 1, 1999.

Sec. 54.104. TIME OF SERVICE REQUIREMENTS. (a) The commission

by rule may prescribe the period within which a certificate holder
must be able to serve customers.
(b) Notwithstanding Subsection (a), a certificate holder must
serve a customer not later than the 30th day after the date the
customer requests service.

Acts 1997, 75th Leg., ch. 166, Sec. 1, Sept. 1, 1997. Renumbered
from Sec. 54.106 and amended by Acts 1999, 76th Leg., ch. 1212, Sec.
16, eff. Sept. 1, 1999.

Sec. 54.105. PENALTY FOR VIOLATION OF TITLE. If a certificate

holder fails to comply with a requirement of this title, the
commission may:
(1) revoke the holder's certificate;
(2) impose against the holder administrative penalties
under Subchapter B, Chapter 15; or
(3) take another action under Subchapter B, Chapter 15.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Renumbered from Sec. 54.111 by Acts 1999, 76th Leg., ch. 1212, Sec.
16, eff. Sept. 1, 1999.

SUBCHAPTER D. SERVICE PROVIDER CERTIFICATE OF OPERATING AUTHORITY

Sec. 54.151. DEFINITION. In this subchapter, "certificate"
means a service provider certificate of operating authority.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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Sec. 54.152. LIMITATION ON GRANT OF CERTIFICATE. The

commission may not grant a certificate to a holder of a:
(1) certificate of convenience and necessity for the same
territory; or
(2) certificate of operating authority for the same
territory.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 54.153. ELIGIBILITY FOR CERTIFICATE. (a) A company is

not eligible to obtain a certificate under this subchapter if the
company, together with affiliates, had more than six percent of the
total intrastate switched access minutes of use as measured for the
most recent 12-month period:
(1) that precedes the date the application is filed; and
(2) for which the access information is available.
(b) The commission shall obtain information necessary to
determine eligibility from the incumbent local exchange telephone
companies and the applicant.
(c) The commission shall certify eligibility not later than the
10th day after the date the application is filed.
(d) In this section:
(1) "Affiliate" means an entity that, directly or
indirectly, owns or controls, is owned or controlled by, or is under
common ownership or control with a company that applies for a
certificate under this subchapter.
(2) "Control" means to exercise substantial influence over
the policies and actions of another.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 54.154. APPLICATION FOR CERTIFICATE. (a) The commission

may grant a certificate to encourage an innovative, competitive, and
entrepreneurial business to provide telecommunications services.
(b) An applicant for a certificate must:
(1) file with the application:
(A) a sworn statement that the applicant has applied

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for each municipal consent, franchise, or permit required for the

type of services and facilities for which the applicant has applied;
and
(B) a description of the services the applicant will
provide;
(2) show the areas in which the applicant will provide the
services;
(3) demonstrate that the applicant has the financial and
technical ability to provide services; and
(4) demonstrate that the services will meet the
requirements of this subchapter.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 54.155. GRANT OR DENIAL OF CERTIFICATE. (a) The

commission must grant or deny a certificate not later than the 60th
day after the date the application for the certificate is filed. The
commission may extend the deadline on good cause shown.
(b) The commission shall grant each certificate on a
nondiscriminatory basis after considering factors such as:
(1) the technical and financial qualifications of the
applicant; and
(2) the applicant's ability to meet the commission's
quality of service requirements.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 54.156. RESALE OF SERVICES. (a) A certificate holder may

obtain services under the resale tariffs approved by the commission
under Subchapter C, Chapter 60, except in a certificated area of a
company that serves fewer than 31,000 access lines.
(b) A certificate holder may obtain for resale the monthly
recurring flat rate local exchange telephone service and associated
nonrecurring charges, including any mandatory extended area service,
of an incumbent local exchange company at a five percent discount to
the tariffed rate.
(c) The incumbent local exchange company shall sell a feature
service that may be provided to a customer in conjunction with local
exchange service at a five percent discount to the tariffed rate,

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including any associated nonrecurring charge for those services,

provided that the incumbent local exchange company shall make
available to a certificate holder, at an additional five percent
discount, any discounts made available to customers of the incumbent
local exchange company who are similarly situated to the customers of
the certificate holder. In this subsection "feature service"
includes:
(1) toll restriction;
(2) call control options;
(3) tone dialing;
(4) custom calling; and
(5) caller identification.
(d) A certificate holder and an incumbent local exchange
company may agree to a rate lower than the tariffed rate or
discounted rate.
(e) The five percent discounts provided by this section do not
apply in an exchange of a company that has fewer than 31,000 access
lines in this state.
(f) If the tariffed rate for a resold service changes, the five
percent discount prescribed by this section applies to the changed
rate. The commission may not, for certificate holders, create a
special class for purposes of resold services.
(g) A certificate holder:
(1) may not use a resold flat rate local exchange telephone
service to avoid the rates and terms of an incumbent local exchange
company's tariffs;
(2) may not terminate both flat rate local exchange
telephone service and services obtained under the resale tariff
approved under Section 60.041 on the same end user customer's
premises;
(3) may not use resold flat rate local exchange telephone
services to provide access services to another interexchange carrier,
cellular carrier, competitive access provider, or retail
telecommunications provider, but may permit customers to use resold
local exchange telephone services to access such a carrier or
provider;
(4) may sell the flat rate local exchange telephone service
only to the same class of customers to which the incumbent local
exchange company sells that service;
(5) may obtain services offered by or negotiated with a

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holder of a certificate of convenience and necessity or a certificate

of operating authority; and
(6) may obtain for resale single or multiple line flat rate
intraLATA calling service when provided by the local exchange company
at the tariffed rate for online digital communications.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 54.157. OPTIONAL EXTENDED AREA SERVICE OR EXPANDED LOCAL

CALLING SERVICE. (a) A certificate holder may purchase for resale:
(1) optional extended area service; and
(2) expanded local calling service.
(b) The purchase of optional extended area service and expanded
local calling service may not be discounted.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 54.158. INTERFERENCE WITH RESOLD SERVICES PROHIBITED. An

incumbent local exchange company may not:
(1) delay providing or maintaining a service provided under
this subchapter;
(2) degrade the quality of access the company provides to
another provider;
(3) impair the speed, quality, or efficiency of a line used
by another provider;
(4) fail to fully disclose in a timely manner after a
request all available information necessary for a certificate holder
to provide resale services; or
(5) refuse to take a reasonable action to allow a
certificate holder efficient access to the company's ordering,
billing, or repair management system.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 54.159. RETENTION OF ACCESS SERVICE AND INTRALATA TOLL

SERVICE. An incumbent local exchange company that sells flat rate
local exchange telephone service to a certificate holder may retain
all access service and "1-plus" intraLATA toll service that

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originates over the resold flat rate local exchange telephone

service.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER E. MUNICIPALITIES
Sec. 54.201. CERTIFICATION PROHIBITED. The commission may not
grant to a municipality a:
(1) certificate of convenience and necessity;
(2) certificate of operating authority; or
(3) service provider certificate of operating authority.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 54.202. PROHIBITED MUNICIPAL SERVICES. (a) A

municipality or municipal electric system may not offer for sale to
the public:
(1) a service for which a certificate of convenience and
necessity, a certificate of operating authority, or a service
provider certificate of operating authority is required; or
(2) a nonswitched telecommunications service used to
connect a customer's premises with:
(A) another customer's premises within the exchange;
or
(B) a long distance provider that serves the exchange.
(b) Subsection (a) applies to a service offered either directly
or indirectly through a telecommunications provider.
(c) This section may not be construed to prevent a municipally
owned utility from providing to its energy customers, either directly
or indirectly, any energy related service involving the transfer or
receipt of information or data concerning the use, measurement,
monitoring, or management of energy utility services provided by the
municipally owned utility, including services such as load management
or automated meter reading.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 5, eff.
September 7, 2005.

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Sec. 54.2025. LEASE OF FIBER OPTIC CABLE FACILITIES. Nothing

in this subchapter shall prevent a municipality, or a municipal
electric system that is a member of a municipal power agency formed
under Chapter 163 by adoption of a concurrent resolution by the
participating municipalities on or before August 1, 1975, from
leasing any of the excess capacity of its fiber optic cable
facilities (dark fiber), so long as the rental of the fiber
facilities is done on a nondiscriminatory, nonpreferential basis.

Added by Acts 1999, 76th Leg., ch. 1212, Sec. 17, eff. Sept. 1, 1999.

Sec. 54.203. SERVICE IN ANNEXED OR INCORPORATED AREA. (a) If

an area is or will be included within a municipality as the result of
annexation, incorporation, or another reason, each telecommunications
utility that holds or is entitled to hold a certificate under this
title to provide service or operate a facility in the area before the
inclusion has the right to continue to provide the service or operate
the facility and extend service in the utility's certificated area
within the annexed or incorporated area under the rights granted by
the certificate and this title.
(b) Notwithstanding any other law, a certificated
telecommunications utility has the right to:
(1) continue and extend service within the utility's
certificated area; and
(2) use roads, streets, highways, alleys, and public
property to furnish retail utility service.
(c) The governing body of a municipality may require a
certificated telecommunications utility to relocate the utility's
facility at the utility's expense to permit the widening or
straightening of a street by:
(1) giving the utility 30 days' notice; and
(2) specifying the new location for the facility along the
right-of-way of the street.
(d) This section does not limit the power of a city, town, or
village to incorporate or of a municipality to extend its boundaries
by annexation.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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Sec. 54.204. DISCRIMINATION BY MUNICIPALITY PROHIBITED. (a)

Notwithstanding Section 14.008, a municipality or a municipally owned
utility may not discriminate against a certificated
telecommunications provider regarding:
(1) the authorization or placement of a facility in a
public right-of-way;
(2) access to a building; or
(3) a municipal utility pole attachment rate or term.
(b) In granting consent, a franchise, or a permit for the use
of a public street, alley, or right-of-way within its municipal
boundaries, a municipality or municipally owned utility may not
discriminate in favor of or against a certificated telecommunications
provider regarding:
(1) municipal utility pole attachment or underground
conduit rates or terms; or
(2) the authorization, placement, replacement, or removal
of a facility in a public right-of-way and the reasonable
compensation for the authorization, placement, replacement, or
removal regardless of whether the compensation is in the form of:
(A) money;
(B) services;
(C) use of facilities; or
(D) another kind of consideration.
(c) A municipality or a municipally owned utility may not
charge any entity, regardless of the nature of the services provided
by that entity, a pole attachment rate or underground conduit rate
that exceeds the fee the municipality or municipally owned utility
would be permitted to charge under rules adopted by the Federal
Communications Commission under 47 U.S.C. Section 224(e) if the
municipality's or municipally owned utility's rates were regulated
under federal law and the rules of the Federal Communications
Commission. In addition, not later than September 1, 2006, a
municipality or municipally owned utility shall charge a single,
uniform pole attachment or underground conduit rate to all entities
that are not affiliated with the municipality or municipally owned
utility regardless of the services carried over the networks attached
to the poles or underground conduit.
(d) Notwithstanding any other law, the commission has the

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jurisdiction necessary to enforce this section.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 6, eff.
September 7, 2005.

Sec. 54.205. MUNICIPALITY'S RIGHT TO CONTROL ACCESS. This

title does not restrict a municipality's historical right to control
and receive reasonable compensation for access to the municipality's
public streets, alleys, or rights-of-way or to other public property.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 54.206. RECOVERY OF MUNICIPAL FEE. (a) A holder of a

certificate of convenience and necessity, a certificate of operating
authority, or a service provider certificate of operating authority
has the right to collect a fee that a municipality imposes under
Section 54.204 or 54.205 through a pro rata charge to the customers
in the boundaries of the municipality.
(b) The charge may be shown on the customer's bill as a
separate line item.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER F. REGULATION OF SERVICES, AREAS, AND FACILITIES

Sec. 54.251. PROVISION OF SERVICE. (a) Except as provided by
this section, Section 54.252, Section 54.253, and Section 54.254, a
telecommunications utility that holds a certificate of convenience
and necessity or a certificate of operating authority shall:
(1) offer all basic local telecommunications services to
each customer in the utility's certificated area; and
(2) provide continuous and adequate service in that area.
(b) Except as specifically determined otherwise by the
commission under this subchapter or Subchapter G of this chapter, and
except as provided by Subchapters C and D, Chapter 65, the holder of
a certificate of convenience and necessity for an area has the
obligations of a provider of last resort regardless of whether

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another provider has a certificate of operating authority or service

provider certificate of operating authority for that area.
(c) A certificate holder may meet the holder's provider of last
resort obligations using any available technology. Notwithstanding
any provision of Chapter 56, the commission may adjust disbursements
from the universal service fund to companies using technologies other
than traditional wireline or landline technologies to meet provider
of last resort obligations. As determined by the commission, the
certificate holder shall meet minimum quality of service standards,
including standards for 911 service, comparable to those established
for traditional wireline or landline technologies and shall offer
services at a price comparable to the monthly service charge for
comparable services in that exchange or the provider's nearest
exchange.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 2003, 78th Leg., ch. 76, Sec. 1, eff. Sept. 1, 2003.
Amended by:
Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 7, eff.
September 7, 2005.
Acts 2011, 82nd Leg., R.S., Ch. 98 (S.B. 980), Sec. 6, eff.
September 1, 2011.

Sec. 54.252. GROUNDS FOR REDUCTION OF SERVICE BY HOLDER OF

CERTIFICATE OF CONVENIENCE AND NECESSITY. (a) Except to the extent
otherwise ordered by the commission in accordance with this
subchapter, the holder of a certificate of convenience and necessity
may not discontinue, reduce, or impair service to any part of the
holder's certificated service area except for:
(1) nonpayment of charges;
(2) nonuse; or
(3) another similar reason that occurs in the usual course
of business.
(b) A discontinuance, reduction, or impairment of service must
be in compliance with and is subject to any condition or restriction
the commission prescribes.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 2003, 78th Leg., ch. 76, Sec. 2, eff. Sept. 1, 2003.

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Sec. 54.253. DISCONTINUATION OF SERVICE BY CERTAIN CERTIFICATE

HOLDERS. (a) A telecommunications utility that holds a certificate
of operating authority or a service provider certificate of operating
authority may:
(1) cease operations in the utility's certificated area;
or
(2) discontinue an optional service that is not essential
to providing basic local telecommunications service.
(b) Before the telecommunications utility ceases operations or
discontinues an optional service, the utility, in the manner required
by the commission, must give notice of the intended action to:
(1) the commission;
(2) each affected customer;
(3) the Commission on State Emergency Communications;
(4) the office; and
(5) each wholesale provider of telecommunications
facilities or services from which the utility has purchased
facilities or services.
(c) The telecommunications utility is entitled to discontinue
an optional service on or after the 61st day after the date the
utility gives the notice.
(d) The telecommunications utility may not cease operations in
its certificated area unless the commission authorizes the utility to
cease operations and:
(1) another provider of basic local telecommunications
services has adequate facilities and capacity to serve the customers
in the certificated area; or
(2) the utility is an "exiting utility," as that term is
defined by Section 54.301, no other telecommunications utility has
facilities sufficient to provide basic local telecommunications
service in the defined geographic area, and the utility acts in good
faith to provide for a transition of the utility's existing basic
local telecommunications service customers to another holder of a
certificate for that area.
(e) The commission may not authorize the telecommunications
utility to cease operations under Subsection (d) before the 61st day
after the date the utility gives the notice required by Subsection
(b). Unless the commission receives a complaint from an affected
person, the commission may enter an order under this subsection
administratively.

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Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 2003, 78th Leg., ch. 76, Sec. 3, eff. Sept. 1, 2003.

Sec. 54.254. REQUIRED REFUSAL OF SERVICE. A holder of a

certificate of convenience and necessity, a certificate of operating
authority, or a service provider certificate of operating authority
shall refuse to serve a customer in the holder's certificated area if
the holder is prohibited from providing the service under Section
212.012, 232.029, or 232.0291, Local Government Code.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2005, 79th Leg., Ch. 708 (S.B. 425), Sec. 14, eff. September
1, 2005.

Sec. 54.255. TRANSFER OF CERTAIN CERTIFICATES. (a) A

telecommunications utility may sell, assign, or lease a certificate
of convenience and necessity or a certificate of operating authority
or a right obtained under such a certificate if the commission
determines that the purchaser, assignee, or lessee can provide
adequate service.
(b) The sale, assignment, or lease of a certificate or a right
is subject to conditions the commission prescribes.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 54.256. APPLICATION OF CONTRACTS. A contract approved by

the commission between telecommunications utilities that designates
areas and customers to be served by the utilities:
(1) is valid and enforceable; and
(2) shall be incorporated into the appropriate areas of
certification.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 54.257. INTERFERENCE WITH ANOTHER TELECOMMUNICATIONS

UTILITY. If a telecommunications utility constructing or extending

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the utility's lines, plant, or system interferes or attempts to

interfere with the operation of a line, plant, or system of another
utility, the commission by order may:
(1) prohibit the construction or extension; or
(2) prescribe terms for locating the affected lines,
plants, or systems.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 54.258. MAPS. A public utility shall file with the

commission one or more maps that show each utility facility and that
separately illustrate each utility facility for transmission or
distribution of the utility's services on a date the commission
orders.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 54.259. DISCRIMINATION BY PROPERTY OWNER PROHIBITED. (a)

If a telecommunications utility holds a consent, franchise, or permit
as determined to be the appropriate grants of authority by the
municipality and holds a certificate if required by this title, a
public or private property owner may not:
(1) prevent the utility from installing on the owner's
property a telecommunications service facility a tenant requests;
(2) interfere with the utility's installation on the
owner's property of a telecommunications service facility a tenant
requests;
(3) discriminate against such a utility regarding
installation, terms, or compensation of a telecommunications service
facility to a tenant on the owner's property;
(4) demand or accept an unreasonable payment of any kind
from a tenant or the utility for allowing the utility on or in the
owner's property; or
(5) discriminate in favor of or against a tenant in any
manner, including rental charge discrimination, because of the
utility from which the tenant receives a telecommunications service.
(b) Subsection (a) does not apply to an institution of higher
education. In this subsection, "institution of higher education"
means:

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(1) an institution of higher education as defined by

Section 61.003, Education Code; or
(2) a private or independent institution of higher
education as defined by Section 61.003, Education Code.
(c) Notwithstanding any other law, the commission has the
jurisdiction to enforce this section.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 54.260. PROPERTY OWNER'S CONDITIONS. (a) Notwithstanding

Section 54.259, if a telecommunications utility holds a municipal
consent, franchise, or permit as determined to be the appropriate
grant of authority by the municipality and holds a certificate if
required by this title, a public or private property owner may:
(1) impose a condition on the utility that is reasonably
necessary to protect:
(A) the safety, security, appearance, and condition of
the property; and
(B) the safety and convenience of other persons;
(2) impose a reasonable limitation on the time at which the
utility may have access to the property to install a
telecommunications service facility;
(3) impose a reasonable limitation on the number of such
utilities that have access to the owner's property, if the owner can
demonstrate a space constraint that requires the limitation;
(4) require the utility to agree to indemnify the owner for
damage caused installing, operating, or removing a facility;
(5) require the tenant or the utility to bear the entire
cost of installing, operating, or removing a facility; and
(6) require the utility to pay compensation that is
reasonable and nondiscriminatory among such telecommunications
utilities.
(b) Notwithstanding any other law, the commission has the
jurisdiction to enforce this section.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 54.261. SHARED TENANT SERVICES CONTRACT. Sections 54.259

and 54.260 do not require a public or private property owner to enter

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into a contract with a telecommunications utility to provide shared

tenant services on a property.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER G. PROVIDER OF LAST RESORT

Sec. 54.301. DEFINITIONS. In this subchapter:
(1) "Exiting utility" means a telecommunications utility
that:
(A) holds a certificate of operating authority or a
service provider certificate of operating authority;
(B) is the predominant provider of basic local
telecommunications service in a defined geographic area and provides
those services using the utility's own facilities; and
(C) ceases operations in all or part of the utility's
certificated service area under Section 54.253 or 54.303.
(2) "Provider of last resort" means a certificated
telecommunications utility that must offer basic local
telecommunications service throughout a defined geographic area.
(3) "Successor utility" means a telecommunications utility
that holds a certificate of convenience and necessity, certificate of
operating authority, or service provider certificate of operating
authority, and that is or is designated to become the provider of
last resort for the defined geographic area previously served by an
exiting utility.

Added by Acts 2003, 78th Leg., ch. 76, Sec. 4, eff. Sept. 1, 2003.

Sec. 54.3015. APPLICABILITY OF SUBCHAPTER. This subchapter

applies to a transitioning company under Chapter 65 in relation to
its regulated exchanges in the same manner and to the same extent
this subchapter applies to a holder of a certificate of convenience
and necessity.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 8, eff.
September 7, 2005.
Amended by:
Acts 2011, 82nd Leg., R.S., Ch. 98 (S.B. 980), Sec. 7, eff.
September 1, 2011.

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Sec. 54.302. PROVIDER OF LAST RESORT; FACILITIES-BASED

PROVIDERS. (a) Notwithstanding any other provision of this title,
if a telecommunications utility installs facilities to serve
customers located in a defined geographic area to provide
telecommunications services, including basic local telecommunications
service, before the holder of the certificate of convenience and
necessity installs facilities to serve customers located in that
defined geographic area, the holder of the certificate of convenience
and necessity may petition the commission for an order relieving the
utility of the utility's designation as the provider of last resort
in that defined geographic area.
(b) The commission shall relieve the holder of the certificate
of convenience and necessity of the obligations of service as the
provider of last resort for the defined geographic area, and the
commission shall designate the facilities-based telecommunications
utility as the provider of last resort if the commission determines
that:
(1) the holder of the certificate of convenience and
necessity does not have facilities in place to provide basic local
telecommunications service to all customers within that defined
geographic area;
(2) another certificated telecommunications utility has
installed facilities adequate to provide that service throughout that
area; and
(3) the public interest would be served by transferring the
provider of last resort obligations for that area.
(c) The commission shall complete proceedings necessary to make
the determinations prescribed by this section not later than the 91st
day after the date the petition is filed under Subsection (a).

Added by Acts 2003, 78th Leg., ch. 76, Sec. 4, eff. Sept. 1, 2003.

Sec. 54.303. SUCCESSOR TELECOMMUNICATIONS UTILITY WHEN NO

SUFFICIENT FACILITIES EXIST. (a) When the commission obtains notice
as required under Section 54.253 or otherwise that a utility intends
to become an exiting utility and no other telecommunications utility
has facilities sufficient to provide basic local telecommunications

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service in that defined geographic area, the commission shall open a

contested case proceeding to determine:
(1) the identity of the successor utility under this
section; and
(2) the amount of universal service funding under
Subchapter G, Chapter 56, to be made available to the successor
utility.
(b) On designation as the successor utility under this section,
the commission, if applicable, shall provide to the successor
utility:
(1) a reasonable time, in accordance with industry
practices and not subject to otherwise applicable commission service
quality rules or standards, to modify, construct, or obtain
facilities necessary to serve the customers of the exiting
telecommunications utility; and
(2) an exemption on a transitional basis from any
obligation to unbundle the utility's network elements or to provide
service for resale within that defined geographic area for nine
months or another reasonable period the commission may authorize as
necessary to modify the utility's network to provide that unbundling
or resale.
(c) A customer within the defined geographic area to be served
by the successor utility is considered to have applied for service
from the successor utility on the effective date of that designation
by the commission. Each right, privilege, and obligation of being a
customer of the successor utility applies to that customer and the
customer is subject to the successor utility's applicable terms of
service as specified in an applicable tariff or contract.

Added by Acts 2003, 78th Leg., ch. 76, Sec. 4, eff. Sept. 1, 2003.

Sec. 54.304. ABANDONMENT OR CESSATION BY FACILITIES-BASED

PROVIDER; EMERGENCY RESTORATION. (a) The commission, on its own
motion or on the petition of an interested party, may institute an
expedited proceeding under this section if the commission finds that:
(1) a holder of a certificate of operating authority or
service provider certificate of operating authority is the
predominant provider of basic local telecommunications service in a
defined geographic area and the utility provides that service using

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the utility's own facilities;

(2) no other telecommunications utility has facilities
sufficient to provide basic local telecommunications service in that
defined geographic area; and
(3) the holder of the certificate of operating authority or
service provider certificate of operating authority has:
(A) ceased providing basic local telecommunications
service to the utility's customers in that defined geographic area;
or
(B) abandoned the operation of the utility's facilities
in the defined geographic area that are used to provide basic local
telecommunications service.
(b) In a proceeding under this section, the commission may
declare that an emergency exists and issue any order necessary to
protect the health, safety, and welfare of affected customers of the
utility and to expedite the restoration and continuation of basic
local telecommunications service to those customers. An order issued
by the commission under this subsection may include an order to:
(1) provide for a temporary arrangement for operation of
the utility's facilities by an uncertificated entity that agrees to
provide service;
(2) authorize one or more third parties to enter the
premises of the abandoned facilities; or
(3) grant temporary waivers from quality of service
requirements.
(c) The commission may designate a successor utility in
accordance with Section 54.303 during a proceeding under this
section.

Added by Acts 2003, 78th Leg., ch. 76, Sec. 4, eff. Sept. 1, 2003.

Sec. 54.305. COMMISSION PARTICIPATION IN BANKRUPTCY

PROCEEDINGS. (a) The commission, on written notice that a
certificated telecommunications utility has filed a petition in
bankruptcy or is the subject of an involuntary petition in
bankruptcy, may inform the appropriate court and parties of the
commission's interest in obtaining notice of proceedings.
(b) Within the time prescribed by the applicable statutes,
rules, and court orders, the commission may intervene and participate

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in any bankruptcy proceedings that affect customers or providers of

telecommunications services in this state.
(c) The office may inform the appropriate court and parties of
the office's interest in obtaining notice of the proceedings. Within
the time prescribed by the applicable statutes, rules, and court
orders, the office may intervene and participate in any bankruptcy
proceeding on behalf of residential and small commercial customers.

Added by Acts 2003, 78th Leg., ch. 76, Sec. 4, eff. Sept. 1, 2003.

CHAPTER 55. REGULATION OF TELECOMMUNICATIONS SERVICES

SUBCHAPTER A. GENERAL PROVISIONS
Sec. 55.001. GENERAL STANDARD. A public utility shall furnish
service, instrumentalities, and facilities that are safe, adequate,
efficient, and reasonable.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 55.002. COMMISSION AUTHORITY CONCERNING STANDARDS. The

commission, on its own motion or on complaint and after reasonable
notice and hearing, may:
(1) adopt just and reasonable standards, classifications,
rules, or practices a public utility must follow in furnishing a
service;
(2) adopt adequate and reasonable standards for measuring a
condition, including quantity and quality, relating to the furnishing
of a service;
(3) adopt reasonable rules for examining, testing, and
measuring a service; and
(4) adopt or approve reasonable rules, specifications, and
standards to ensure the accuracy of equipment, including meters and
instruments, used to measure a service.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 55.003. RULE OR STANDARD. (a) A public utility may not

impose a rule except as provided by this title.
(b) A public utility may file with the commission a standard,

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classification, rule, or practice the utility follows.

(c) The standard, classification, rule, or practice continues
in force until:
(1) amended by the utility; or
(2) changed by the commission as provided by this subtitle.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 55.004. LOCAL EXCHANGE COMPANY RULE OR PRACTICE CHANGE.

(a) To make a change in an incumbent local exchange company's
tariffed rules or practices that does not affect the company's
charges or rates, the company must file the proposed change with the
commission at least 35 days before the effective date of the change.
The commission may require the incumbent local exchange company to
provide to ratepayers appropriate notice as determined by the
commission.
(b) The commission, on complaint by an affected person or on
its own motion and after reasonable notice, may hold a hearing to
determine the propriety of a change proposed under this section.
Pending the hearing and decision, the commission may suspend the
change for not longer than 120 days after the date the change would
otherwise be effective. The commission shall approve, deny, or
modify the change before the period of suspension expires.
(c) In a proceeding under this section, the incumbent local
exchange company has the burden of proving the proposed change:
(1) is in the public interest; and
(2) complies with this title.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 55.005. UNREASONABLE PREFERENCE OR PREJUDICE CONCERNING

SERVICE PROHIBITED. In providing a service to persons in a
classification, a public utility may not:
(1) grant an unreasonable preference or advantage to a
person in the classification; or
(2) subject a person in the classification to an
unreasonable prejudice or disadvantage.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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Sec. 55.006. DISCRIMINATION AND RESTRICTION ON COMPETITION. A

public utility may not:
(1) discriminate against a person who sells or leases
equipment or performs services in competition with the public
utility; or
(2) engage in a practice that tends to restrict or impair
that competition.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 55.007. MINIMUM SERVICES. (a) The commission shall

require a holder of a certificate of convenience and necessity or a
certificate of operating authority to provide at the applicable
tariff rate, if any, to each customer, regardless of race, national
origin, income, or residence in an urban or rural area:
(1) single-party service;
(2) tone-dialing service;
(3) basic custom calling features;
(4) equal access for an interLATA interexchange carrier on
a bona fide request; and
(5) digital switching capability in an exchange on customer
request, provided by a digital switch in the exchange or by
connection to a digital switch in another exchange.
(b) Notwithstanding Subsection (a), an electing incumbent local
exchange company serving more than 175,000 but fewer than 1,500,000
access lines on January 1, 1995, shall install a digital switch in
each central office that serves an exchange of fewer than 20,000
access lines.
(c) The commission may temporarily waive a requirement imposed
by Subsection (a) or (b) on a showing of good cause.
(d) The commission may not consider the cost of implementing
this section in determining whether an electing company is entitled
to:
(1) a rate increase under Chapter 58 or 59; or
(2) increased universal service funds under Subchapter B,
Chapter 56.
(e) Expired.

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Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 55.008. IMPROVEMENTS IN SERVICE; INTERCONNECTING SERVICE.

The commission, after notice and hearing, may:
(1) order a public utility to provide specified
improvements in its service in a specified area if:
(A) service in the area is inadequate or substantially
inferior to service in a comparable area; and
(B) requiring the company to provide the improved
service is reasonable; or
(2) order two or more utilities to establish specified
facilities for interconnecting service.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 55.009. INTRALATA CALLS. (a) If federal law prohibits a

local exchange company in this state from providing interLATA
telecommunications services, the local exchange companies in this
state designated or de facto authorized to receive a "0-plus" or "1-
plus" dialed intraLATA call are exclusively designated or authorized
to receive such a call.
(b) A telecommunications utility operating under a certificate
of operating authority or a service provider certificate of operating
authority is de facto authorized to receive a "0-plus" or "1-plus"
dialed intraLATA call on the date the utility receives its
certificate, to the extent the utility is not restricted by Section
54.159.
(c) If federal law allows all local exchange companies to
provide interLATA telecommunications services, the commission shall
ensure that:
(1) a customer may designate a provider of the customer's
choice to carry the customer's "0-plus" and "1-plus" dialed intraLATA
calls; and
(2) equal access in the public network is implemented to
allow the provider to carry those calls.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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Sec. 55.010. BILLING FOR SERVICE TO THE STATE. A

telecommunications utility providing service to the state, including
service to an agency in any branch of state government, may not
impose a fee, a penalty, interest, or any other charge for delinquent
payment of a bill for that service.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 55.011. NOTICE OF IDENTITY OF INTEREXCHANGE CARRIER. (a)

A local exchange company shall print on the first page of each bill
sent to a customer of the local exchange company the name of the
customer's primary interexchange carrier if the company provides
billing services for that carrier.
(b) The bill must contain instructions on how the customer can
contact the commission if the customer believes that the named
carrier is not the customer's primary interexchange carrier.
(c) The commission may, for good cause, waive the billing
requirement prescribed by this section in exchanges served by local
exchange companies serving not more than 31,000 access lines.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 18.04(b), eff. Sept. 1,
1999.

Sec. 55.013. LIMITATIONS ON DISCONTINUANCE OF BASIC LOCAL

TELECOMMUNICATIONS SERVICE. (a) A provider of basic local
telecommunications service may not discontinue that service because
of nonpayment by a residential customer of charges for long distance
service. Payment shall first be allocated to basic local
telecommunications service.
(b) For purposes of allocating payment in this section, if the
provider of basic local telecommunications service bundles its basic
local telecommunications service with long distance service or any
other service and provides a discount for the basic local
telecommunications service because of that bundling, the rate of
basic local telecommunications service shall be the rate the provider
charges for stand-alone basic local telecommunications service.
(c) Notwithstanding Subsection (a), the commission shall adopt
and implement rules, not later than January 1, 2000, to prevent
customer abuse of the protections afforded by this section. The

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rules must include:

(1) provisions requiring a provider of basic local
telecommunications service to offer and implement toll blocking
capability to limit a customer's ability to incur additional charges
for long distance services after nonpayment for long distance
services; and
(2) provisions regarding fraudulent activity in response to
which a provider may discontinue a residential customer's basic local
telecommunications service.
(d) Notwithstanding any other provision of this title, the
commission has all jurisdiction necessary to establish a maximum
price that an incumbent local exchange company may charge a long
distance service provider to initiate the toll blocking capability
required to be offered under the rules adopted under Subsection (c).
The maximum price established under this subsection shall be observed
by all providers of basic local telecommunications service in the
incumbent local exchange company's certificated service area.
Notwithstanding Sections 52.102 and 52.152, the commission has all
jurisdiction necessary to enforce this section.
(e) A provider of basic local exchange telecommunications
service shall comply with the requirements of this section not later
than March 1, 2000.

Added by Acts 1999, 76th Leg., ch. 1212, Sec. 19, eff. Sept. 1, 1999.

Sec. 55.014. PROVISION OF ADVANCED TELECOMMUNICATIONS SERVICES.

(a) In this section, "advanced service" means any telecommunications
service other than residential or business basic local exchange
telephone service, caller identification service, and customer
calling features.
(b) This section applies to a company electing under Chapter 58
or a company that holds a certificate of operating authority or
service provider certificate of operating authority.
(c) Notwithstanding any other provision of this title,
beginning September 1, 2001, a company to which this section applies
that provides advanced telecommunications services within the
company's urban service areas, shall, on a bona fide retail request
for those services, provide in rural areas of this state served by
the company advanced telecommunications services that are reasonably

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comparable to the advanced services provided in urban areas. The

company shall offer the advanced telecommunications services:
(1) at prices, terms, and conditions that are reasonably
comparable to the prices, terms, and conditions for similar advanced
services provided by the company in urban areas; and
(2) within 15 months after the bona fide request for those
advanced services.
(d) Notwithstanding any other provision of this title, a
company to which this section applies shall, on a bona fide retail
request for those services, offer caller identification service and
custom calling features in rural areas served by the company. The
company shall offer the services:
(1) at prices, terms, and conditions reasonably comparable
to the company's prices, terms, and conditions for similar services
in urban areas; and
(2) within 15 months after the bona fide request for those
services.
(e) This section may not be construed to require a company to:
(1) begin providing services in a rural area in which the
company does not provide local exchange telephone service; or
(2) provide a service in a rural area of this state unless
the company provides the service in urban areas of this state.
(f) For purposes of this section, a company to which this
section applies is considered to provide services in urban areas of
this state if the company provides services in a municipality with a
population of more than 190,000.
(g) Notwithstanding any other provision of this title, the
commission has all jurisdiction necessary to enforce this section.

Added by Acts 1999, 76th Leg., ch. 1212, Sec. 20, eff. Sept. 1, 1999.

Sec. 55.015. LIFELINE SERVICE. (a) The commission shall adopt

rules prohibiting a certificated provider of local exchange telephone
service from discontinuing basic network services listed in Section
58.051 to a consumer who receives lifeline service because of
nonpayment by the consumer of charges for other services billed by
the provider, including interexchange telecommunications service.
(b) The commission shall adopt rules providing for automatic
enrollment to receive lifeline service for eligible consumers. The

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Health and Human Services Commission, on request of the commission,

shall assist in the adoption and implementation of those rules. The
commission and the Health and Human Services Commission shall enter
into a memorandum of understanding establishing the respective duties
of those agencies in relation to the automatic enrollment.
(b-1) The commission shall adopt rules requiring certificated
providers of local exchange telephone service to implement procedures
to ensure that all consumers are clearly informed both orally and in
writing of the existence of the lifeline service program when they
request or initiate service or change service locations or providers.
On or before June 1, 2006, the commission shall enter into a
memorandum of understanding with the Health and Human Services
Commission, and, to the maximum extent feasible, housing authorities
in the principal cities of each metropolitan statistical area, to
improve enrollment rates in the lifeline service program.
(c) A certificated provider of local exchange telephone service
may block a lifeline service participant's access to all
interexchange telecommunications service except toll-free numbers
when the participant owes an outstanding amount for that service.
The provider shall remove the block without additional cost to the
participant on payment of the outstanding amount.
(d) A certificated provider of local exchange telephone service
shall offer a consumer who applies for or receives lifeline service
the option of blocking all toll calls or, if technically capable,
placing a limit on the amount of toll calls. The provider may not
charge the consumer an administrative charge or other additional
amount for the blocking service.
(d-1) A certificated provider of local exchange telephone
service shall provide access to lifeline service to a customer whose
income is not more than 150 percent of the applicable income level
established by the federal poverty guidelines or in whose household
resides a person who receives or has a child who receives:
(1) Medicaid;
(2) food stamps;
(3) Supplemental Security Income;
(4) federal public housing assistance;
(5) Low Income Home Energy Assistance Program (LIHEAP)
assistance; or
(6) health benefits coverage under the state child health
plan under Chapter 62, Health and Safety Code.

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(d-2) A certificated provider of local exchange telephone

service shall provide consumers who apply for or receive lifeline
service access to available vertical services or custom calling
features, including caller ID, call waiting, and call blocking, at
the same price as other consumers. Lifeline discounts shall only
apply to that portion of the bill that is for basic network service.
(e) In this section, "lifeline service" means a retail local
service offering described by 47 C.F.R. Section 54.401(a), as
amended.

Added by Acts 1999, 76th Leg., ch. 1212, Sec. 21, eff. Sept. 1, 1999.
Amended by:
Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 9, eff.
September 7, 2005.
Acts 2017, 85th Leg., R.S., Ch. 48 (S.B. 1976), Sec. 2, eff.
September 1, 2017.

Sec. 55.016. TELECOMMUNICATIONS BILLING. (a) The

proliferation of charges for separate services, products, surcharges,
fees, and taxes on a bill for telecommunications products or services
has increased the complexity of those bills to such an extent that in
some cases the bills have become difficult for customers to
understand.
(b) A bill from a local exchange company for telecommunications
products or services should be consistent with providing customers
sufficient information about the charges included in the bill to
understand the basis and source of the charges.
(c) To the extent permitted by law, a monthly bill from a local
exchange company for local exchange telephone service shall clearly
identify all charges including basic local service charges, fees,
carrier's charges, assessments, surcharges, optional services, and
taxes.
(d) Local exchange carriers shall annually file a copy of that
portion of their bill that has not been previously approved by the
commission for compliance review with this section.
(e) The commission shall have all necessary authority to
enforce this section.

Added by Acts 1999, 76th Leg., ch. 1212, Sec. 18, eff. Mar. 1, 2000.
Amended by Acts 2001, 77th Leg., ch. 963, Sec. 1, eff. June 14, 2001.

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Renumbered from Sec. 55.012 by Acts 2001, 77th Leg., ch. 1420, Sec.
21.001(110), eff. Sept. 1, 2001.

Sec. 55.017. IDENTIFICATION REQUIRED. (a) A representative of

a telecommunications provider or a video or cable service provider
that has an easement in or a right-of-way over or through real
property must show proof of identification to the owner of the real
property when entering the property if requested by the owner.
(b) This section does not apply to regularly scheduled service
readings or examinations.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 10, eff.
September 7, 2005.

SUBCHAPTER B. EXTENDED AREA SERVICE

Sec. 55.021. EXTENDED AREA SERVICE. After notice and a
hearing, the commission may order one or more local exchange
companies that are dominant carriers to provide:
(1) mandatory extended area service in accordance with
Section 55.022; or
(2) optional extended area service in accordance with
Section 55.023.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 55.022. MANDATORY SERVICE. The commission may order

mandatory extended area service in a specified metropolitan area if:
(1) there is a sufficient community of interest in the
area; and
(2) the company can reasonably provide the service.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 55.023. OPTIONAL EXTENDED AREA SERVICE. (a) The

commission may order optional extended area service in a specified
calling area if:
(1) each affected company and the representatives of at

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least one political subdivision in the proposed calling area agree to

the service; and
(2) the proposed common calling area has a single,
continuous boundary.
(b) The commission may not adopt rules that diminish in any
manner the ability of an affected company or a political subdivision
to enter into joint agreements for optional extended area service
under this section.
(c) In this section, "political subdivision" means:
(1) a county;
(2) a municipality; or
(3) an unincorporated town or village that has 275 or more
access lines.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 55.024. CHARGE FOR EXTENDED AREA SERVICE. (a) An

incumbent local exchange company that provides mandatory two-way
extended area service to customers shall impose for that service a
separately stated monthly charge of $3.50 a line for a residential
customer and $7 a line for a business customer if, on September 1,
1995, the company:
(1) served more than 1,000,000 access lines in this state;
and
(2) imposed a separately stated monthly charge for
mandatory two-way extended area service of more than $3.50 a line for
a residential customer and more than $7 a line for a business
customer.
(b) The company shall recover all costs incurred and all loss
of revenue that results from imposition of the rates prescribed by
Subsection (a) in the manner prescribed by Section 55.048(c).
(c) The rate limitation prescribed by Subsection (a) does not
apply to a separately stated monthly charge for:
(1) extended area service in or into a metropolitan
exchange; or
(2) extended metropolitan service.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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Sec. 55.025. HUNTING SERVICE. (a) A local exchange company

shall make available, at a reasonable tariffed rate, hunting service
from local exchange lines to extended metropolitan service lines.
(b) The company may not require a customer to purchase
additional extended metropolitan service to obtain the hunting
service.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 55.026. NEW ORDERS PROHIBITED AFTER CERTAIN DATE. On or

after September 1, 2011, the commission may not require a
telecommunications provider to provide mandatory or optional extended
area service to additional metropolitan areas or calling areas.

Added by Acts 2011, 82nd Leg., R.S., Ch. 98 (S.B. 980), Sec. 8, eff.
September 1, 2011.

SUBCHAPTER C. EXPANDED TOLL-FREE LOCAL CALLING AREAS

Sec. 55.041. DEFINITIONS. In this subchapter, "metropolitan
exchange," "local calling area of a metropolitan exchange," and
"exchange" have the meanings and boundaries assigned by the
commission on September 1, 1993.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 55.042. CONTIGUOUS EXCHANGE. The commission may expand a

toll-free local calling area into an exchange that is not in a
metropolitan exchange but is in a local calling area that is
contiguous to a metropolitan exchange that the commission determines
has a community of interest with the exchange for which a petition is
filed under this subchapter.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 55.043. SPLITTING EXCHANGES PROHIBITED. Notwithstanding

any other provision of this subchapter, the commission may not split
a petitioning or requested exchange in establishing a toll-free local

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calling area.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 55.044. EXEMPTION. (a) The commission may not require an

incumbent local exchange company serving the petitioning or requested
exchange to expand the company's toll-free local calling area under
this subchapter if:
(1) the incumbent local exchange company has fewer than
10,000 access lines;
(2) the petitioning or requested exchange is served by a
telephone cooperative corporation;
(3) extended area service or extended metropolitan service
is available between the exchanges;
(4) the petitioning or requested exchange is a metropolitan
exchange; or
(5) the commission determines that the company has shown
that to serve the area is not geographically or technologically
feasible.
(b) To promote the wide dispersion of pay telephones, the
commission may:
(1) exempt pay telephones from this subchapter; or
(2) change the rates charged for calls from pay telephones.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 55.045. ELIGIBILITY TO PETITION. The telephone

subscribers of an incumbent local exchange company exchange that
serves not more than 10,000 access lines may petition the commission
for expansion of the company's toll-free local calling area if:
(1) the petitioning exchange's central switching office is
located within 22 miles, using vertical and horizontal geographic
coordinates, of the central switching office of the exchange
requested for expanded local calling service; or
(2) the petitioning exchange's central office is not more
than 50 miles from the central office of the exchange requested for
expanded local calling service and the exchanges share a community of
interest.

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Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 55.046. PETITION REQUIREMENTS. (a) A petition under this

subchapter must be signed by a number of the exchange's subscribers
equal at least to the lesser of 100 of the exchange's subscribers or
five percent of the exchange's subscribers.
(b) An exchange that petitions under Section 55.045(2) must
demonstrate in the petition that the exchange shares a community of
interest with the requested exchange.
(c) For purposes of this section, the relationships between
exchanges that create a community of interest include:
(1) a relationship because of schools, hospitals, local
governments, or business centers; or
(2) other relationships that would make the unavailability
of expanded local calling service a hardship for the residents of the
area.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 55.047. BALLOTING AND CONSIDERATION. (a) If the

commission receives a petition that complies with this subchapter,
the commission shall order the incumbent local exchange company to
provide ballots to the subscribers in the petitioning exchange.
(b) The commission shall consider the request for expansion of
the toll-free local calling area if at least 70 percent of the
subscribers who vote do so in favor of the expansion.
(c) The commission by rule shall provide for an expedited
hearing on the issue of expansion.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 55.048. CHARGES. (a) The incumbent local exchange

company shall recover all costs incurred and all loss of revenue from
an expansion of a toll-free local calling area under this subchapter
through a request other than a revenue requirement showing by
imposing a monthly fee under Subsection (b) or (c), or both.
(b) The company may impose a monthly fee against each
residential and business customer in the petitioning exchange. The

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fee may not exceed $3.50 a line for a residential customer and $7 a
line for a business customer unless the customer's toll-free local
calling area includes more than five exchanges. The company may
impose an additional monthly fee of $1.50 for each exchange in excess
of five. This subsection applies regardless of the number of
petitions required to obtain access to the exchanges. A company may
impose a fee under this subsection only until the company's next
general rate case.
(c) The company may impose a monthly fee against each of the
company's local exchange service customers in this state. This fee
is in addition to the company's local exchange rates.
(d) The company may not recover regulatory case expenses under
this subchapter by imposing a surcharge on the subscribers of the
petitioning exchange.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 55.049. EXPANSION PROHIBITED AFTER CERTAIN DATE. On or

after September 1, 2011, the commission may not order an expansion of
a toll-free local calling area.

Added by Acts 2011, 82nd Leg., R.S., Ch. 98 (S.B. 980), Sec. 9, eff.
September 1, 2011.

SUBCHAPTER D. OPERATOR SERVICE PROVIDERS

Sec. 55.081. DEFINITION. In this subchapter, "operator
service" means a service using live operator or automated operator
functions to handle telephone service such as toll calling using
collect, third-number billing, and calling card services. The term
does not include a call for which the called party has arranged to be
billed (800 service).

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 55.082. APPLICABILITY. Except as provided by Section

55.088, this subchapter applies only to a telecommunications utility
that is not a dominant carrier.

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Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 55.083. RULES AND PROCEDURES. (a) The commission may

adopt rules and establish procedures to enforce and implement this
subchapter.
(b) A rule adopted under this subchapter must be
nondiscriminatory and designed to promote competition that
facilitates consumer choice.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 55.084. INFORMATION DISPLAYED ON PUBLIC USE TELEPHONE.

(a) An operator service provider shall furnish each entity with
which it contracts to provide operator service a sticker, card, or
other form of information approved by the commission for each
telephone that:
(1) has access to the service; and
(2) is intended for use by the public.
(b) The commission may grant the owner of a telephone approval
for an alternative form of information.
(c) The information must state:
(1) the provider's name;
(2) that the operator service provider will provide rate
information on a caller's request;
(3) that a caller, on the caller's request, will be
informed of the method of access to the local exchange carrier
operator; and
(4) that a complaint about the service may be made to the
provider or to the commission at the designated telephone number.
(d) The operator service provider shall by contract require an
entity receiving information to display the information on or near
each telephone for which the operator service provider is required to
furnish the information.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 55.085. CONNECTION ANNOUNCEMENT. Before connecting a

call, the operator service provider shall:

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(1) announce the provider's name; and

(2) at the caller's request, quote the rate and any other
fee or surcharge that applies to the call and is charged by the
provider.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 55.086. INFORMATION REQUIRED ON ACCESS TO LOCAL EXCHANGE

COMPANY OPERATOR. (a) An operator service provider, on a caller's
request, shall inform the caller of the method of access to the local
exchange carrier operator serving the exchange from which the call is
made.
(b) A charge may not be made for information provided under
this section.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 55.087. ACCESS TO LOCAL EXCHANGE COMPANY AND OTHER

UTILITIES REQUIRED. (a) The commission by rule shall require an
operator service provider to include in its contract with each entity
through which it provides operator service a provision that requires
each telephone subscribed to its service to allow access to:
(1) the local exchange carrier operator serving the
exchange from which the call is made; and
(2) other telecommunications utilities.
(b) To prevent fraudulent use of its service, an operator
service provider or an entity through which it provides operator
service may block the access described by Subsection (a) by obtaining
a waiver for this purpose from the commission or the Federal
Communications Commission. The commission by rule shall establish
the procedure and criteria for obtaining a waiver from the
commission.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 55.088. ACCESS TO LIVE OPERATOR REQUIRED. (a) A dominant

or nondominant telecommunications utility that provides operator
service shall ensure that a caller has access to a live operator at

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the beginning of a live or mechanized operator-assisted call through

a method designed to be easily and clearly understandable and
accessible to the caller.
(b) A telecommunications utility described by Subsection (a)
shall submit to the commission for review the method by which the
utility will provide access to a live operator.
(c) This section applies regardless of the method by which the
telecommunications utility provides operator service.
(d) This section does not apply to a telephone located in a
prison or jail facility.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 55.089. COMMISSION MAY INVESTIGATE AND ACT ON VIOLATION.

(a) If the commission determines that an operator service provider
has violated or is about to violate this subchapter, the commission,
after notice and evidentiary hearing, may take action to stop,
correct, or prevent the violation.
(b) The commission may investigate a complaint that it receives
concerning an operator service.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER E. CALLER IDENTIFICATION SERVICE

Sec. 55.101. DEFINITIONS. In this subchapter:
(1) "Caller identification information" means any
information that may be used to identify the specific originating
number or originating location of a wire or electronic communication
transmitted by a telephone, including the telephone listing number or
the name of the customer from whose telephone a telephone number is
dialed.
(2) "Caller identification service" means a service that
provides caller identification information to a device that can
display the information.
(3) "Per-call blocking" means a telecommunications service
that prevents caller identification information from being
transmitted to a called party on an individual call when the calling
party affirmatively acts to prevent the transmission.
(4) "Per-line blocking" means a telecommunications service

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that prevents caller identification information from being

transmitted to a called party on each call unless the calling party
affirmatively acts to permit the transmission.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 55.102. APPLICABILITY. (a) This subchapter applies only

to the provision of caller identification service.
(b) This subchapter does not apply to:
(1) an identification service that is used in a limited
system, including a central office based PBX-type system;
(2) information that is used on a public agency's emergency
telephone line or on a line that receives the primary emergency
telephone number (911);
(3) information exchanged between telecommunications
utilities, enhanced service providers, or other entities that is
necessary for the setting up, processing, transmission, or billing of
telecommunications or related services;
(4) information provided in compliance with applicable law
or legal process; or
(5) an identification service provided in connection with a
700, 800, or 900 access code telecommunications service.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 55.103. PROVISION OF SERVICE. (a) A telecommunications

utility may offer caller identification services under this
subchapter only if the utility obtains written authorization from the
commission.
(b) A commercial mobile service provider may offer caller
identification services in accordance with Sections 55.104, 55.105,
55.106, 55.1065, and 55.107.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 62, Sec. 18.05(a), eff. Sept. 1, 1999.

Sec. 55.104. USE OF INFORMATION. (a) A person may not use a

caller identification service to compile and sell specific local call

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information without the affirmative approval of the originating

telephone customer.
(b) This section does not prohibit a provider of caller
identification service from:
(1) verifying network performance or testing the caller
identification service;
(2) compiling, using, and disclosing aggregate caller
identification information; or
(3) complying with applicable law or legal process.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 55.105. PER-CALL BLOCKING. Except as provided by Section

55.1065, the commission shall require that a provider of caller
identification service offer free per-call blocking to each telephone
subscriber in the specific area in which the service is offered.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 62, Sec. 18.05(b), eff. Sept. 1, 1999.

Sec. 55.106. PER-LINE BLOCKING. (a) Except as provided by

Section 55.1065, the commission shall require that a provider of
caller identification service offer free per-line blocking to a
particular customer if the commission receives from the customer
written certification that the customer has a compelling need for
per-line blocking.
(b) A provider who is ordered to offer per-line blocking under
this section shall notify the customer by mail of the date the
blocking will begin.
(c) If a customer removes and later reinstates the per-line
block, the provider may assess a service order charge in an amount
approved by the commission for the provider's administrative expenses
relating to the reinstatement.
(d) The commission may impose a fee or assessment on a provider
in an amount sufficient to cover the additional expenses the
commission incurs in implementing the customer certification
provisions of this section.
(e) Information received under this section by the commission
or by a provider is confidential and may be used only to administer

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this section.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 62, Sec. 18.05(c), eff. Sept. 1, 1999.

Sec. 55.107. LIMITATION ON COMMISSION AUTHORITY. The

commission may prescribe in relation to blocking only a requirement
authorized by Sections 55.105, 55.106, and 55.1065.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 62, Sec. 18.05(e), eff. Sept. 1, 1999.

Sec. 55.109. IMPLEMENTATION OF PANEL RECOMMENDATIONS. The

commission may implement the recommendations of the Caller ID
Consumer Education Panel and interested parties to the extent
consistent with the public interest.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 55.110. REPORT OF BLOCKING FAILURE. (a) A provider of

caller ID services who becomes aware of the failure of per-call or
per-line blocking to block identification of a customer shall report
that failure to the commission, the Caller ID Consumer Education
Panel, and the customer whose identification was not blocked.
(b) The provider shall make a reasonable effort to notify the
customer within 24 hours after the provider becomes aware of the
failure. The provider is not required to notify the customer if the
customer reported the failure.
(c) In this section, "caller ID service" means a service that
permits the called party to determine the identity, telephone number,
or address of the calling party. The term does not include 911
services.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER F. AUTOMATIC DIAL ANNOUNCING DEVICES

Sec. 55.121. DEFINITIONS. In this subchapter:

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(1) "Automated dial announcing device" means automated

equipment used for telephone solicitation or collection that can:
(A) store telephone numbers to be called or produce
numbers to be called through use of a random or sequential number
generator; and
(B) convey, alone or in conjunction with other
equipment, a prerecorded or synthesized voice message to the number
called without the use of a live operator.
(2) "Telephone solicitation" means an unsolicited call.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2013, 83rd Leg., R.S., Ch. 600 (S.B. 1040), Sec. 1, eff.
September 1, 2013.

Sec. 55.122. EXEMPTIONS. This subchapter does not apply to the

use of an automated dial announcing device:
(1) to make a call relating to an emergency or a public
service under a program developed or approved by the emergency
management coordinator of the county in which the call is received;
(2) by a public or private primary or secondary school
system to locate or account for a truant student;
(3) by a municipality or a person calling on behalf of a
municipality to deliver information to citizens of the municipality
regarding a public health, safety, or welfare issue; or
(4) by an organization to a member of the organization.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2013, 83rd Leg., R.S., Ch. 600 (S.B. 1040), Sec. 2, eff.
September 1, 2013.

Sec. 55.1225. APPLICABILITY. This subchapter applies to an

automated dial announcing device used to make a telephone call that
originates or terminates in this state.

Added by Acts 2013, 83rd Leg., R.S., Ch. 600 (S.B. 1040), Sec. 3, eff.
September 1, 2013.

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Sec. 55.123. NOTICE OF USE OF DEVICE TO TELECOMMUNICATIONS

UTILITY. A person may not use an automated dial announcing device to
make a telephone call in which the device plays a recorded message
when the connection is completed unless the person gives to each
telecommunications utility over whose system the device is to be used
written notice specifying the type of device to be used.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 55.124. RANDOM OR SEQUENTIAL NUMBER CALLING. A person may

not use an automated dial announcing device for random number dialing
or to dial numbers determined by successively increasing or
decreasing integers if the person uses the device to make a telephone
call in which the device plays a recorded message when the connection
is completed.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 55.125. HOURS WHEN USE PROHIBITED. (a) A person may not
use an automated dial announcing device to make a telephone
solicitation call terminating in this state in which the device plays
a recorded message when the connection is completed if the call is
made:
(1) before noon or after 9 p.m. on a Sunday; or
(2) before 9 a.m. or after 9 p.m. on a weekday or a
Saturday.
(b) A person may not use an automated dial announcing device to
make a telephone collection call terminating in this state in which
the device plays a recorded message when the connection is completed
if the call is made at an hour at which collection calls are
prohibited under the federal Fair Debt Collection Practices Act (15
U.S.C. Section 1692 et seq.).

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 55.126. DEVICE DISCONNECTION. A person may not use an

automated dial announcing device to make a telephone call in which
the device plays a recorded message when the connection is completed

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unless the device disconnects from the called person's line not later
than five seconds after the call is terminated by either party. If
the device cannot disconnect during that period, a live operator must
introduce the call and receive the called person's oral consent
before beginning a prerecorded or synthesized voice message.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 667, Sec. 2, eff. Sept. 1, 1999.

Sec. 55.127. CONTENTS OF RECORDED MESSAGE. (a) A person may

not use an automated dial announcing device to make a telephone call
in which the device plays a recorded message when the connection is
completed unless the recorded message states during the first 30
seconds of the call:
(1) the nature of the call;
(2) the identity of the person, company, or organization
making the call; and
(3) the telephone number from which the call is made.
(b) In addition to the requirements prescribed by Subsection
(a), a call during which a cross-promotion or reference to a pay-per-
call information service is made must include a statement of:
(1) the fact that a caller who makes a call to a pay-per-
call information service's telephone number will be charged for that
call;
(2) the amount of the flat-rate or cost-per-minute charge
the caller will incur or the amount of both if both charges will be
incurred; and
(3) the estimated amount of time required to receive all
the information offered by the service during a call.
(c) Subsection (a) does not apply to the use of a device if the
device is used:
(1) for debt collection purposes in compliance with
applicable federal law and regulations; and
(2) by a live operator for automated dialing or hold
announcement purposes.
(d) In this section, "pay-per-call information service" means a
service that routinely delivers, for a predetermined and sometimes
time-sensitive fee, a prerecorded or live message or interactive
program after the caller dials a specified 900 or 976 number.

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Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 55.128. DURATION OF RECORDED MESSAGE. A person may not

use an automated dial announcing device to make for solicitation
purposes a telephone call in which the device plays a recorded
message when the connection is completed unless:
(1) the recorded message is shorter than 30 seconds; or
(2) the device has the technical capacity to:
(A) recognize a telephone answering device on the
called person's line; and
(B) terminate the call within 30 seconds.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 62, Sec. 18.05(f), eff. Sept. 1, 1999.

Sec. 55.129. PERMIT REQUIRED. A person may not use an

automated dial announcing device to make a telephone call in which
the device plays a recorded message when the connection is completed
unless the person has a permit under Section 55.130.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 55.130. PERMIT. (a) A person may not use an automated

dial announcing device without a permit issued by the commission.
(b) An applicant for an original permit must submit to the
commission an application on a form that:
(1) is prescribed by the commission; and
(2) contains:
(A) the telephone number of each automated dial
announcing device that the person will use; and
(B) the physical address from which each automated dial
announcing device will operate.
(c) An original permit is valid for one year and may be renewed
annually by filing with the commission the information required by
Subsection (b)(2).
(d) An application for an original permit or a filing required
for the renewal of the permit must be accompanied by the appropriate
fee prescribed by Section 55.131.

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(e) In determining whether to deny an application for an

original permit or renewal of the permit, the commission shall
consider the compliance record of the owner or operator of the
automated dial announcing device and may deny the application based
on that record.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 55.131. PERMIT FEE. (a) The commission shall prescribe a

fee for an original permit or renewal of a permit.
(b) The amount of the original permit fee must be reasonable
and cover the enforcement cost to the commission but may not exceed
$500.
(c) The fee for renewal of a permit may not exceed $100.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 55.132. NOTIFICATION OF CHANGE. (a) The owner or

operator of an automated dial announcing device shall notify the
commission if the telephone number of the device or the physical
address from which the device operates changes.
(b) The owner or operator shall give the notice by certified
mail not later than the 48th hour before the hour the device begins
operating with the new telephone number or at the new address.
(c) If the owner or operator of a device fails to give notice
as required by Subsection (b), the person's permit is invalid.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 55.133. NOTIFICATION OF LOCAL EXCHANGE COMPANY. The

commission shall provide to a local exchange company on request a
copy of a permit issued under this subchapter and of any change
relating to the permit.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 55.134. COMPLAINTS AND ENFORCEMENT. (a) The commission

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shall:
(1) investigate complaints relating to the use of an
automated dial announcing device; and
(2) enforce this subchapter.
(b) A local exchange company that receives a complaint relating
to the use of an automated dial announcing device shall send the
complaint to the commission. The commission by rule shall prescribe
the procedures and requirements for sending a complaint to the
commission.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 55.135. REVOCATION OF PERMIT. The commission may revoke a

person's permit if the person fails to comply with this subchapter.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 55.136. DISCONNECTION OF SERVICE. (a) If the commission

or a court determines that a person has violated this subchapter, the
commission or court shall require a telecommunications utility to
disconnect service to the person.
(b) The telecommunications utility may reconnect service to the
person only on a determination by the commission that the person will
comply with this subchapter.
(c) Not later than the third day before the date of the
disconnection, the telecommunications utility shall give notice to
the person using the device of its intent to disconnect service.
However, if the device is causing network congestion or blockage, the
notice may be given on the day before the date of disconnection.
(d) A telecommunications utility, without an order by the
commission or a court, may disconnect or refuse to connect service to
a person using or intending to use an automated dial announcing
device if the utility determines that the device would cause or is
causing network harm.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 55.137. ADMINISTRATIVE PENALTY. (a) The commission may

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impose an administrative penalty against a person who owns or

operates an automated dial announcing device in violation of this
subchapter or a commission rule or order.
(b) The penalty for a violation may be in an amount not to
exceed $1,000 for each day or portion of a day during which the
device operates in violation of this subchapter or a commission rule
or order.
(c) The administrative penalty is civil in nature and is in
addition to any other penalty provided by law.
(d) The commission by rule shall prescribe the procedures for
assessing an administrative penalty under this section. The
procedures must require proper notice and hearing in accordance with
Chapter 2001, Government Code.
(e) A person may appeal the final order of the commission under
Chapter 2001, Government Code. The substantial evidence rule applies
on appeal.
(f) The proceeds of administrative penalties collected under
this section shall be deposited to the credit of the commission. The
commission shall use the proceeds to enforce this subchapter.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 62, Sec. 18.05(g), eff. Sept. 1, 1999.

Sec. 55.138. CRIMINAL PENALTY. (a) A person commits an

offense if the person owns or operates an automated dial announcing
device that the person knows is operating in violation of this
subchapter.
(b) An offense under this section is a Class A misdemeanor.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER H. PAY TELEPHONES

Sec. 55.171. DEFINITION. In this subchapter, "provider" means
an entity that provides pay telephone service, including:
(1) an incumbent local exchange company; and
(2) a subscriber to a customer-owned pay telephone service.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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Sec. 55.172. LIMITATION. This subchapter prescribes the limits

of:
(1) the right of a provider to set the provider's rates and
charges for pay telephone services; and
(2) the commission's authority over the pay telephone
service rates of an incumbent local exchange company.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 55.173. REGISTRATION. (a) A person may not provide pay

telephone service in this state unless the person is registered with
the commission.
(b) This section does not apply to a provider who holds a
certificate of convenience and necessity.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 55.1735. CHARGE FOR PAY PHONE ACCESS LINE. The charge or
surcharge a local exchange company imposes for an access line used to
provide pay telephone service in an exchange may not exceed the
amount of the charge or surcharge the company imposes for an access
line used for regular business purposes in that exchange.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 11, eff.
September 7, 2005.

Sec. 55.174. PROHIBITION ON CHARGE FOR CERTAIN CALLS. A

provider may not charge a person making a call on a pay telephone
for:
(1) local directory assistance; or
(2) a call made under Chapter 771 or 772, Health and Safety
Code.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 55.175. CHARGE FOR LOCAL CALLS. (a) The commission shall
establish the limit on the amount a provider may charge for a pay

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telephone coin sent-paid call in the local exchange company's toll-

free calling area.
(b) The commission may establish a statewide ceiling on the
amount a provider may charge for a local pay telephone call that is:
(1) collect;
(2) operator assisted; or
(3) paid by credit card or calling card.
(c) The commission may not establish the ceiling under
Subsection (b) at an amount that is less than the applicable local
rates for such a call imposed by any of the four largest
interexchange telecommunications carriers operating in this state.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 55.176. CHARGE FOR 800-TYPE CALLS. (a) A provider may

charge at a pay telephone a fee of not more than 25 cents for
initiating an 800-type call.
(b) A provider may impose the fee only if:
(1) the pay telephone is registered with the commission;
and
(2) the provider certifies that the pay telephone complies
with commission rules regarding the provision of pay telephone
service.
(c) Subsection (b) does not apply to a local exchange company
pay telephone.
(d) A provider may not impose the fee if imposition is
inconsistent with federal law.
(e) A provider may not impose the fee for a:
(1) local call;
(2) 911 call;
(3) local directory assistance call; or
(4) call that is covered by the Telephone Operator Consumer
Services Improvement Act of 1990 (47 U.S.C. Section 226).
(f) A provider who imposes the fee must post on each pay
telephone notice that the fee will be charged. The provider must
post the notice:
(1) in plain sight of the user; and
(2) in a manner consistent with existing commission
requirements for posting information.

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(g) The commission may not impose on a local exchange company

the duty or obligation to:
(1) record the use of pay telephone service;
(2) bill or collect for the use of the pay telephone; or
(3) remit to the provider the fee authorized by this
section.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 55.177. CHARGE FOR CREDIT CARD, CALLING CARD, OR OPERATOR-

ASSISTED CALLS. (a) A provider may not impose for a credit card,
calling card, or live or automated operator-assisted call a rate or
charge that is greater than the authorized rates and charges
published on March 18, 1995, in the eight newspapers having the
largest circulation in this state.
(b) The published rates may not be changed.
(c) This section does not apply to a local exchange company.
Chapter 58 governs the pay telephone rates of an incumbent local
exchange company that elects incentive regulation under that chapter.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 55.178. NOTICE OF INABILITY TO RECEIVE CALLS. (a) A

provider may not display the telephone number of a pay telephone that
cannot receive telephone calls.
(b) A provider shall place in a conspicuous location on each
pay telephone that cannot receive telephone calls a notice stating in
letters one-fourth inch high: "THIS TELEPHONE CANNOT RECEIVE
TELEPHONE CALLS."
(c) A provider that violates this section or a rule or order
adopted by the commission under this section is subject to a civil
penalty as provided by Section 15.028 unless the provider takes
corrective action to comply with this section or the rule or order
not later than the 14th day after the date the provider receives
written notice of the violation.
(d) The commission has jurisdiction over a provider to the
extent necessary to enforce this section regardless of whether a
provider is a telecommunications utility regulated under this title.
(e) The commission may establish procedures to enforce this

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section.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 55.179. INFORMATION REQUIREMENTS. (a) The commission by

rule may prescribe the information that must be posted on a pay
telephone.
(b) A commission rule may not require a provider or an
affiliate of a provider to police compliance by another provider with
the commission's rules.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 55.180. VIOLATIONS. The commission may order the

disconnection of pay telephone service for not more than one year for
repeat violations of commission rules.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER I. DIRECTORY LISTINGS AND ASSISTANCE

Sec. 55.201. TERMS OF DIRECTORY LISTINGS AND ASSISTANCE. (a)
Each company that provides local exchange telephone service in
overlapping certificated areas shall negotiate the terms of printed
directory listings and directory assistance in those areas.
(b) On complaint by the incumbent local exchange company or the
holder of a certificate of convenience and necessity, a certificate
of operating authority, or a service provider certificate of
operating authority, the commission may:
(1) resolve a dispute between the parties; and
(2) issue an order setting the terms of the directory
listings or directory assistance, if necessary.
(c) This section does not affect the authority of an incumbent
local exchange company to voluntarily conduct negotiations with an
applicant for a certificate of convenience and necessity, a
certificate of operating authority, or a service provider certificate
of operating authority.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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Sec. 55.202. DIRECTORY PUBLISHED BY TELECOMMUNICATIONS UTILITY.

A telecommunications utility or an affiliate of that utility that
publishes a residential or business telephone directory that is
distributed to the public shall publish in the directory the name of
each state senator or representative who represents all or part of
the geographical area for which the directory contains listings.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 55.203. DIRECTORY PUBLISHED BY PRIVATE PUBLISHER. (a) A

private for-profit publisher of a residential telephone directory
that is distributed to the public at minimal or no cost shall include
in the directory:
(1) a listing of any toll-free and local telephone numbers
of:
(A) state agencies;
(B) state public services; and
(C) each state elected official who represents all or
part of the geographical area for which the directory contains
listings; and
(2) the Internet address of the state electronic Internet
portal and a statement that Internet sites for state agencies may be
accessed through the state electronic Internet portal.
(b) The listing required by this section must be:
(1) clearly identified; and
(2) located or clearly referenced at the front of the
directory before the main listing of residential and business
telephone numbers.
(c) The commission by rule may specify:
(1) the format of the listing; and
(2) criteria for inclusion of agencies, services, and
officials.
(d) The commission's rules must require a publisher to list:
(1) the telephone number for state government information;
and
(2) telephone numbers alphabetically by:
(A) the subject matter of agency programs; and

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(B) agency name.

(e) The commission, with the cooperation of other state
agencies, shall:
(1) compile relevant information to ensure accuracy of
information in the listing; and
(2) provide the information to a telecommunications utility
or telephone directory publisher within a reasonable time after a
request by the utility or publisher.
(f) The Department of Information Resources shall cooperate
with the commission and with publishers to ensure that the subject
matter listing of programs and telephone numbers in the telephone
directories are consistent with the categorization developed by the
Records Management Interagency Coordinating Council under Section
441.203(j), Government Code.
(g) The rules adopted under Subsection (d) must provide that a
telecommunications utility that publishes and distributes to the
public a residential or business telephone directory shall list
prominently in the directory the contact information for the
specialized telecommunications assistance program established under
Subchapter E, Chapter 56.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 62, Sec. 18.06(a), eff. Sept. 1, 1999;
Acts 2001, 77th Leg., ch. 424, Sec. 5, eff. Sept. 1, 2001; Acts
2001, 77th Leg., ch. 1420, Sec. 20.002, eff. Sept. 1, 2001; Acts
2003, 78th Leg., ch. 165, Sec. 1, eff. Sept. 1, 2003.
Amended by:
Acts 2007, 80th Leg., R.S., Ch. 937 (H.B. 3560), Sec. 2.08, eff.
September 1, 2007.
Acts 2011, 82nd Leg., R.S., Ch. 973 (H.B. 1504), Sec. 32, eff.
June 17, 2011.

Sec. 55.204. ELECTRONIC TELEPHONE DIRECTORY. (a)

Notwithstanding any other law, a telecommunications provider or
telecommunications utility, to further the recycling goals, may
publish on the provider's or the utility's Internet website a
telephone directory or directory listing instead of providing for
general distribution to the public of printed directories or
listings.

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(b) A provider or utility that publishes a telephone directory

or directory listing as described by Subsection (a) shall provide a
print or digital copy of the directory or listing to a customer on
request. If a provider or utility exercises this option, it shall
notify its customers that the provider or utility shall provide the
first print or digital copy requested by a customer in each calendar
year at no charge to the customer.

Added by Acts 2011, 82nd Leg., R.S., Ch. 1180 (H.B. 3395), Sec. 4,
eff. June 17, 2011.

SUBCHAPTER J. TELECOMMUNICATIONS SERVICE BY CERTAIN PROVIDERS

Sec. 55.251. CHARGE FOR HOTEL OR MOTEL CALL. A hotel or motel
may not charge more than 50 cents for:
(1) a local telephone call;
(2) a credit card telephone call;
(3) a collect telephone call; or
(4) any other local telephone call for which assistance
from the hotel or motel operator is not required.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 55.252. 900 SERVICE USED BY PROBATIONERS OR PAROLEES. (a)

This section applies only to a telecommunications utility that
transports or provides an intrastate 900 service that is:
(1) covered by a contract authorized by Chapter 76 or 508,
Government Code; and
(2) used by a defendant under the supervision of a
community supervision and corrections department or the parole
division of the Texas Department of Criminal Justice to:
(A) pay a fee or cost; or
(B) comply with telephone reporting requirements.
(b) A telecommunications utility may adjust or authorize the
adjustment of an end-user's bill for 900 service described by
Subsection (a) only with the consent of the contracting community
supervision and corrections department or the contracting parole
division of the Texas Department of Criminal Justice.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended

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by Acts 1999, 76th Leg., ch. 62, Sec. 18.07(a), eff. Sept. 1, 1999.
Amended by:
Acts 2009, 81st Leg., R.S., Ch. 87 (S.B. 1969), Sec. 25.155, eff.
September 1, 2009.

Sec. 55.253. TELEPHONE PREPAID CALLING SERVICES. (a) In this

section:
(1) "Prepaid calling card company" means a company that
provides a prepaid calling service to the public using its own
network or resold services.
(2) "Prepaid calling service" means a prepaid
telecommunications service that allows an end user to originate a
call using an access number and authorization code.
(b) The commission by rule may prescribe standards regarding
the information a prepaid calling card company shall disclose to
customers in relation to the rates and terms of service for prepaid
calling services offered in this state.
(c) The commission is granted all necessary jurisdiction to
adopt rules under this section and to enforce those rules and this
section.
(d) A violation of a rule adopted under this section is subject
to enforcement under Subchapter B, Chapter 15.

Added by Acts 1999, 76th Leg., ch. 411, Sec. 1, eff. June 18, 1999.

SUBCHAPTER K. SELECTION OF TELECOMMUNICATIONS UTILITIES

Sec. 55.301. STATE POLICY. It is the policy of this state to
ensure that all customers are protected from the unauthorized
switching of a telecommunications utility selected by the customer to
provide telecommunications service.

Added by Acts 1999, 76th Leg., ch. 1212, Sec. 22, eff. Sept. 1, 1999;
Acts 1999, 76th Leg., ch. 1579, Sec. 6, eff. Aug. 30, 1999.

Sec. 55.302. COMMISSION RULES. (a) The commission shall adopt

nondiscriminatory and competitively neutral rules to implement this
subchapter, including rules that:
(1) ensure that customers are protected from deceptive

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practices in the obtaining of authorizations and verifications

required by this subchapter;
(2) are applicable to all local exchange telephone
services, interexchange telecommunications service, and other
telecommunications service provided by telecommunications utilities
in this state;
(3) are consistent with the rules and regulations
prescribed by the Federal Communications Commission for the selection
of telecommunications utilities;
(4) permit telecommunications utilities to select any
method of verification of a change order authorized by Section
55.303;
(5) require the reversal of certain changes in the
selection of a customer's telecommunications utility in accordance
with Section 55.304(a);
(6) prescribe, in accordance with Section 55.304(b), the
duties of a telecommunications utility that initiates an unauthorized
customer change; and
(7) provide for corrective action and the imposition of
penalties in accordance with Sections 55.305 and 55.306.
(b) The commission is granted all necessary jurisdiction to
adopt rules required by this subchapter and to enforce those rules
and this subchapter.
(c) The commission may notify customers of their rights under
the rules.

Added by Acts 1999, 76th Leg., ch. 1212, Sec. 22, eff. Sept. 1, 1999;
Acts 1999, 76th Leg., ch. 1579, Sec. 6, eff. Aug. 30, 1999.

Sec. 55.303. VERIFICATION OF CHANGE. A telecommunications

utility may verify a change order by:
(1) obtaining written authorization from the customer;
(2) obtaining a toll-free electronic authorization placed
from the telephone number that is the subject of the change order;
or
(3) an oral authorization obtained by an independent third
party.

Added by Acts 1999, 76th Leg., ch. 1212, Sec. 22, eff. Sept. 1, 1999;
Acts 1999, 76th Leg., ch. 1579, Sec. 6, eff. Aug. 30, 1999.

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Sec. 55.304. UNAUTHORIZED CHANGE. (a) If a change in the

selection of a customer's telecommunications utility is not made or
verified in accordance with this subchapter, the change, on request
by the customer, shall be reversed within a period established by
commission ruling.
(b) A telecommunications utility that initiates an unauthorized
customer change shall:
(1) pay all usual and customary charges associated with
returning the customer to its original telecommunications utility;
(2) pay the telecommunications utility from which the
customer was changed any amount paid by the customer that would have
been paid to that telecommunications utility if the unauthorized
change had not been made;
(3) return to the customer any amount paid by the customer
that exceeds the charges that would have been imposed for identical
services by the telecommunications utility from which the customer
was changed if the unauthorized change had not been made; and
(4) provide to the original telecommunications utility from
which the customer was changed all billing records to enable that
telecommunications utility to comply with this subchapter.
(c) The telecommunications utility from which the customer was
changed shall provide to the customer all benefits associated with
the service on receipt of payment for service provided during the
unauthorized change.
(d) A customer is not liable for charges incurred during the
first 30 days after the date of an unauthorized carrier change.

Added by Acts 1999, 76th Leg., ch. 1212, Sec. 22, eff. Sept. 1, 1999;
Acts 1999, 76th Leg., ch. 1579, Sec. 6, eff. Aug. 30, 1999.

Sec. 55.305. CORRECTIVE ACTION AND PENALTIES. (a) If the

commission finds that a telecommunications utility has repeatedly
violated the commission's telecommunications utility selection rules,
the commission shall order the utility to take corrective action as
necessary. In addition, the utility may be subject to administrative
penalties under Sections 15.023-15.027.
(b) An administrative penalty collected under this section

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 UTILITIES CODE

shall be used to enforce this subchapter.

Added by Acts 1999, 76th Leg., ch. 1212, Sec. 22, eff. Sept. 1, 1999;
Acts 1999, 76th Leg., ch. 1579, Sec. 6, eff. Aug. 30, 1999.

Sec. 55.306. REPEATED AND RECKLESS VIOLATION. If the

commission finds that a telecommunications utility has repeatedly and
recklessly violated the commission's telecommunications utility
selection rules, the commission may, if consistent with the public
interest, suspend, restrict, deny, or revoke the registration or
certificate, including an amended certificate, of the
telecommunications utility and, by taking that action, deny the
telecommunications utility the right to provide service in this
state.

Added by Acts 1999, 76th Leg., ch. 1212, Sec. 22, eff. Sept. 1, 1999;
Acts 1999, 76th Leg., ch. 1579, Sec. 6, eff. Aug. 30, 1999.

Sec. 55.307. DECEPTIVE OR FRAUDULENT PRACTICE. The commission

may prohibit a utility from engaging in a deceptive or fraudulent
practice, including a marketing practice, involving the selection of
a customer's telecommunications utility. The commission may define
deceptive and fraudulent practices to which this section applies.

Added by Acts 1999, 76th Leg., ch. 1212, Sec. 22, eff. Sept. 1, 1999;
Acts 1999, 76th Leg., ch. 1579, Sec. 6, eff. Aug. 30, 1999.

Sec. 55.308. CONSISTENCY WITH FEDERAL LAW. Notwithstanding any

other provision of this subchapter, rules adopted by the commission
under this subchapter shall be consistent with applicable federal
laws and rules.

Added by Acts 1999, 76th Leg., ch. 1212, Sec. 22, eff. Sept. 1, 1999.

CHAPTER 56. TELECOMMUNICATIONS ASSISTANCE AND UNIVERSAL SERVICE FUND

SUBCHAPTER A. GENERAL PROVISIONS
Sec. 56.001. DEFINITIONS. In this chapter:

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(1) "Department" means the Department of Assistive and

Rehabilitative Services.
(2) "Designated provider" means a telecommunications
provider designated by the commission to provide services to an
uncertificated area under Subchapter F.
(2-a) "Executive commissioner" means the executive
commissioner of the Health and Human Services Commission.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 2001, 77th Leg., ch. 651, Sec. 1, eff. Sept. 1, 2001.
Amended by:
Acts 2013, 83rd Leg., R.S., Ch. 532 (S.B. 512), Sec. 1, eff.
September 1, 2013.

Sec. 56.002. CONFLICT OF PROVISIONS. If this chapter conflicts

with another provision of this title, this chapter prevails.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER B. UNIVERSAL SERVICE FUND

Sec. 56.021. UNIVERSAL SERVICE FUND ESTABLISHED. The
commission shall adopt and enforce rules requiring local exchange
companies to establish a universal service fund to:
(1) assist telecommunications providers in providing basic
local telecommunications service at reasonable rates in high cost
rural areas under two plans:
(A) the Texas High Cost Universal Service Plan (16
T.A.C. Section 26.403); and
(B) the Small and Rural Incumbent Local Exchange
Company Universal Service Plan (16 T.A.C. Section 26.404);
(2) reimburse the telecommunications carrier that provides
the statewide telecommunications relay access service under
Subchapter D;
(3) finance the specialized telecommunications assistance
program established under Subchapter E;
(4) reimburse the department and the commission for costs
incurred in implementing this chapter and Chapter 57;
(5) reimburse a telecommunications carrier providing
lifeline service as provided by 47 C.F.R. Part 54, Subpart E, as

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amended;
(6) finance the implementation and administration of the
identification process under Section 17.007 for telecommunications
services;
(7) reimburse a designated provider under Subchapter F;
(8) reimburse a successor utility under Subchapter G; and
(9) finance the program established under Subchapter H.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 62, Sec. 18.08(a), eff. Sept. 1, 1999;
Acts 1999, 76th Leg., ch. 835, Sec. 2, eff. Sept. 1, 1999; Acts
1999, 76th Leg., ch. 1212, Sec. 23, eff. Sept. 1, 1999; Acts 1999,
76th Leg., ch. 1553, Sec. 1, eff. Sept. 1, 1999; Acts 2001, 77th
Leg., ch. 651, Sec. 2, eff. Sept. 1, 2001; Acts 2001, 77th Leg., ch.
1451, Sec. 2, eff. Sept. 1, 2001; Acts 2003, 78th Leg., ch. 76, Sec.
5, eff. Sept. 1, 2003; Acts 2003, 78th Leg., ch. 1276, Sec. 17.001,
eff. Sept. 1, 2003.
Amended by:
Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 12, eff.
September 7, 2005.
Acts 2011, 82nd Leg., R.S., Ch. 314 (H.B. 2295), Sec. 1, eff.
June 17, 2011.
Acts 2013, 83rd Leg., R.S., Ch. 532 (S.B. 512), Sec. 2, eff.
September 1, 2013.
Acts 2017, 85th Leg., R.S., Ch. 48 (S.B. 1976), Sec. 3, eff.
September 1, 2017.

Sec. 56.022. UNIFORM CHARGE. (a) The universal service fund

is funded by a statewide uniform charge payable by each
telecommunications provider that has access to the customer base.
(b) A telecommunications provider shall pay the charge in
accordance with procedures approved by the commission.
(c) The uniform charge is on services and at rates the
commission determines. In establishing the charge and the services
to which the charge will apply, the commission may not:
(1) grant an unreasonable preference or advantage to a
telecommunications provider;
(2) assess the charge on pay telephone service; or
(3) subject a telecommunications provider to unreasonable

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prejudice or disadvantage.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 2001, 77th Leg., ch. 404, Sec. 1, eff. Sept. 1, 2001.

Sec. 56.023. COMMISSION POWERS AND DUTIES. (a) The commission

shall:
(1) in a manner that assures reasonable rates for basic
local telecommunications service, adopt eligibility criteria and
review procedures, including a method for administrative review, the
commission finds necessary to fund the universal service fund and
make distributions from that fund;
(2) determine which telecommunications providers meet the
eligibility criteria;
(3) determine the amount of and approve a procedure for
reimbursement to telecommunications providers of revenue lost in
providing tel-assistance service under Subchapter C;
(4) establish and collect fees from the universal service
fund necessary to recover the costs the department and the commission
incur in administering this chapter and Chapter 57;
(5) approve procedures for the collection and disbursal of
the revenue of the universal service fund; and
(6) audit voucher payments and other expenditures made
under the specialized telecommunications assistance program
established under Subchapter E.
(b) The eligibility criteria must require that a
telecommunications provider, in compliance with the commission's
quality of service requirements:
(1) offer service to each consumer within an exchange in
the company's certificated area for which the incumbent local
exchange company receives support under a plan established under
Section 56.021(1) and to any permanent residential or business
premises to which the company is designated to provide services under
Subchapter F; and
(2) render continuous and adequate service within an
exchange in the company's certificated area for which the incumbent
local exchange company receives support under a plan established
under Section 56.021(1) and to any permanent residential or business
premises to which the company is designated to provide services under

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Subchapter F.
(c) A company designated under Subchapter F to provide services
to permanent residential or business premises within an
uncertificated area and that complies with Subsection (b) shall
receive universal service fund distributions to assist the provider
in providing those services. In addition, the commission shall
designate the provider as an eligible telecommunications carrier
under 47 U.S.C. Section 214(e)(2), as amended, for those permanent
residential or business premises.
(d) The commission shall adopt rules for the administration of
the universal service fund and this chapter and may act as necessary
and convenient to administer the fund and this chapter. The rules
must include procedures to ensure reasonable transparency and
accountability in the administration of the universal service fund.
(e) A successor utility, as that term is defined by Section
54.301, that is or becomes an eligible telecommunications carrier
under 47 U.S.C. Section 214(e)(2), as amended, is entitled to receive
universal service fund distributions for costs in accordance with
Subchapter G.
(f) Except as provided by Subsection (g), for an incumbent
local exchange company or cooperative that served greater than 31,000
access lines in this state on September 1, 2022, or a company or
cooperative that is a successor to such a company or cooperative, the
support that the company or cooperative is eligible to receive on
December 31, 2023, under a plan established under Section
56.021(1)(A) is reduced:
(1) on January 1, 2024, to 75 percent of the level of
support the company or cooperative is eligible to receive on December
31, 2023;
(2) on January 1, 2025, to 50 percent of the level of
support the company or cooperative is eligible to receive on December
31, 2023;
(3) on January 1, 2026, to 25 percent of the level of
support the company or cooperative is eligible to receive on December
31, 2023; and
(4) on January 1, 2027, to zero percent of the level of
support the company or cooperative is eligible to receive on December
31, 2023.
(g) After the commission has adopted rules under Subsection
(j), an incumbent local exchange company or cooperative that is

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subject to Subsection (f) may petition the commission to initiate a

contested case proceeding as necessary to determine the eligibility
of the company or cooperative to receive support under a plan
established under Section 56.021(1)(A). A company or cooperative may
not file more than one petition under this subsection. On receipt of
a petition under this subsection, the commission shall initiate a
contested case proceeding to determine the eligibility of the company
or cooperative to receive continued support under a plan established
under Section 56.021(1)(A) for service in the exchanges that are the
subject of the petition. To be eligible to receive support for
service in an exchange under this subsection, the company or
cooperative must demonstrate that it has a financial need for
continued support. The commission must issue a final order on the
proceeding not later than the 330th day after the date the petition
is filed with the commission. Until the commission issues a final
order on the proceeding, the company or cooperative is entitled to
receive the total amount of support the company or cooperative was
eligible to receive on the date the company or cooperative filed the
petition. A company or cooperative that files a petition under this
subsection is not subject to Subsection (f) after the commission
issues a final order on the proceeding. If the commission determines
that a company or cooperative has demonstrated financial need for
continued support under this subsection, it shall set the amount of
support in the same proceeding. The amount of support set by the
commission for an exchange under this subsection may not exceed:
(1) 100 percent of the amount of support that the company
or cooperative will be eligible to receive on December 31, 2023, if
the petition is filed before January 1, 2024;
(2) 75 percent of the amount of support that the company or
cooperative will be eligible to receive on December 31, 2023, if the
petition is filed on or after January 1, 2024, and before January 1,
2025;
(3) 50 percent of the amount of support the company or
cooperative is eligible to receive on December 31, 2023, if the
petition is filed on or after January 1, 2025, and before January 1,
2026;
(4) 25 percent of the amount of support that the company or
cooperative is eligible to receive on December 31, 2023, if the
petition is filed on or after January 1, 2026, and before January 1,
2027; or

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(5) zero percent of the amount of support that the company

or cooperative is eligible to receive on December 31, 2023, if the
petition is filed on or after January 1, 2027, and before January 1,
2028.
(h) Except as provided by Subsection (i), for an incumbent
local exchange company that is an electing company under Chapter 58
or 59 or a cooperative that served greater than 31,000 access lines
in this state on September 1, 2022, or a company or cooperative that
is a successor to such a company or cooperative, the support that the
company or cooperative is eligible to receive on December 31, 2024,
under a plan established under Section 56.021(1)(B) is reduced:
(1) on January 1, 2025, to 75 percent of the level of
support the company or cooperative is eligible to receive on December
31, 2024;
(2) on January 1, 2026, to 50 percent of the level of
support the company or cooperative is eligible to receive on December
31, 2024;
(3) on January 1, 2027, to 25 percent of the level of
support the company or cooperative is eligible to receive on December
31, 2024; and
(4) on January 1, 2028, to zero percent of the level of
support the company or cooperative is eligible to receive on December
31, 2024.
(i) After the commission has adopted rules under Subsection
(j), an incumbent local exchange company or cooperative that is
subject to Subsection (h) may petition the commission to initiate a
contested case proceeding as necessary to determine the eligibility
of the company or cooperative to receive support under a plan
established under Section 56.021(1)(B). A company or cooperative may
not file more than one petition under this subsection. On receipt of
a petition under this subsection, the commission shall initiate a
contested case proceeding to determine the eligibility of the company
or cooperative to receive continued support under a plan established
under Section 56.021(1)(B) for service in the exchanges that are the
subject of the petition. To be eligible to receive support for
service in an exchange under this subsection, the company or
cooperative must demonstrate that it has a financial need for
continued support. The commission must issue a final order on the
proceeding no later than the 330th day after the date the petition is
filed with the commission. Until the commission issues a final order

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on the proceeding, the company or cooperative shall continue to

receive the total amount of support it was eligible to receive on the
date the company or cooperative filed a petition under this
subsection. A company or cooperative that files a petition under
this subsection is not subject to Subsection (h) after the commission
issues a final order on the proceeding. If the commission determines
that a company or cooperative has demonstrated financial need for
continued support under this subsection, it shall set the amount of
support in the same proceeding. The amount of support set by the
commission for an exchange under this subsection may not exceed:
(1) 100 percent of the amount of support that the company
or cooperative will be eligible to receive on December 31, 2024, if
the petition is filed before January 1, 2025;
(2) 75 percent of the amount of support that the company or
cooperative will be eligible to receive on December 31, 2024, if the
petition is filed on or after January 1, 2025, and before January 1,
2026;
(3) 50 percent of the amount of support that the company or
cooperative is eligible to receive on December 31, 2024, if the
petition is filed on or after January 1, 2026, and before January 1,
2027;
(4) 25 percent of the amount of support that the company or
cooperative is eligible to receive on December 31, 2024, if the
petition is filed on or after January 1, 2027, and before January 1,
2028; or
(5) zero percent of the amount of support that the company
or cooperative is eligible to receive on December 31, 2024, if the
petition is filed on or after January 1, 2028, and before January 1,
2029.
(j) The commission by rule shall establish the standards and
criteria for an incumbent local exchange company or cooperative to
demonstrate under Subsection (g) or (i) that the company or
cooperative has a financial need for continued support for
residential and business lines under a plan established under Section
56.021(1).
(k) Subsections (g) and (i) do not authorize the commission to
initiate a contested case hearing concerning a local exchange company
that has elected to participate in a total support reduction plan
under 16 T.A.C. Section 26.403 that requires the company to forego
funding under a plan established under Section 56.021(1) after

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January 1, 2024. This section does not affect any obligation of a

local exchange company subject to such a total support reduction
plan.
(l) Subsections (f), (g), (h), and (i) do not apply to an
incumbent local exchange company that elects, not later than March 1,
2014, to eliminate, not later than September 1, 2018, the support it
receives under a plan established under Section 56.021(1).
(m) Nothing in this chapter relieves any party of an obligation
entered into in the commission's Docket No. 40521.
(n) Nothing in this section is intended to affect the rate
rebalancing proceeding in the commission's Docket No. 41097.
(p) If an incumbent local exchange company or cooperative is
ineligible for support under a plan established under Section
56.021(1) for services in an exchange, a plan established under
Section 56.021(1) may not provide support to any other
telecommunications providers for services in that exchange, except
that an eligible telecommunications provider that is receiving
support under Section 56.021(1)(A) in that exchange shall continue to
receive such support until the commission determines that the support
should be eliminated under Subsection (r). Until the commission
eliminates the support under Subsection (r), the support received by
the eligible telecommunications provider shall be at the same monthly
per line support level in effect for that exchange as of the date the
incumbent local exchange provider or cooperative ceases receiving
funding in that exchange.
(q) Notwithstanding the period for continued support specified
by Subsection (p), if the eligible telecommunications provider
receiving continued support under that subsection is a cooperative or
an affiliate of a cooperative, the telecommunications provider is
entitled to continued support through December 31, 2023, at the same
monthly per line support amount as the provider is receiving as of
the date the support ceases for that exchange for the incumbent local
exchange company or cooperative. Support authorized under this
subsection ceases December 31, 2023.
(r) If the number of access lines served by competitive
eligible telecommunications providers receiving support in an
exchange described by Subsection (p) declines by at least 50 percent
from the number of lines that were served by those providers in that
exchange on December 31, 2016, the commission shall review the per
line support amount for that exchange at least once every three years

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to determine whether continuing the support is in the public

interest. The commission by rule shall establish the criteria to
determine whether the support should be eliminated. The first review
under this subsection for an exchange must be completed not later
than the end of the year following the year in which the number of
access lines first declines by at least 50 percent.
(s) The support for eligible telecommunications providers under
Subsections (p) and (r) expires December 31, 2023.
(t) Not later than September 1 of every fourth year beginning
September 1, 2023, the commission shall review and may adjust the
standards and criteria to demonstrate financial need for continued
support under Subsection (f).
(u) Not later than September 1 of every fourth year beginning
September 1, 2024, the commission shall review and may adjust the
standards and criteria to demonstrate financial need for continued
support under Subsection (h).

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 1212, Sec. 24, eff. Sept. 1, 1999; Acts
2001, 77th Leg., ch. 651, Sec. 3, eff. Sept. 1, 2001; Acts 2003,
78th Leg., ch. 76, Sec. 6, eff. Sept. 1, 2003.
Amended by:
Acts 2011, 82nd Leg., R.S., Ch. 98 (S.B. 980), Sec. 10, eff.
September 1, 2011.
Acts 2013, 83rd Leg., R.S., Ch. 532 (S.B. 512), Sec. 3, eff.
September 1, 2013.
Acts 2013, 83rd Leg., R.S., Ch. 751 (S.B. 583), Sec. 1, eff. June
14, 2013.
Acts 2015, 84th Leg., R.S., Ch. 22 (S.B. 804), Sec. 1, eff.
September 1, 2015.
Acts 2017, 85th Leg., R.S., Ch. 1161 (S.B. 1476), Sec. 1, eff.
June 15, 2017.
Acts 2017, 85th Leg., R.S., Ch. 1161 (S.B. 1476), Sec. 2, eff.
June 15, 2017.
Acts 2023, 88th Leg., R.S., Ch. 946 (S.B. 1710), Sec. 1, eff.
June 18, 2023.

Sec. 56.0231. SUPPORT EXPIRED. Support to an incumbent local

exchange company or cooperative provided under Section 56.023 must be

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reduced on December 31, 2024, to zero percent of the amount of

support that the company or cooperative is eligible to receive on
that date if before December 31, 2022, support to the company or
cooperative had been reduced to 25 percent of the support the company
or cooperative was eligible to receive.

Added by Acts 2023, 88th Leg., R.S., Ch. 946 (S.B. 1710), Sec. 2, eff.
June 18, 2023.

Sec. 56.0232. SUPPORT RELINQUISHED. (a) An eligible

telecommunications provider may notify the commission that the
provider relinquishes the support it is entitled to receive under
this chapter. After notice by the provider, the commission shall
require the entity administering the universal service fund to
terminate support to the provider.
(b) If the commission does not notify the administrator under
Subsection (a) of the provider's request before the 90th day after
the date the commission receives the request, the provider is
entitled to stop receiving the support on that date.

Added by Acts 2023, 88th Leg., R.S., Ch. 946 (S.B. 1710), Sec. 2, eff.
June 18, 2023.

Sec. 56.024. REPORTS; CONFIDENTIALITY. (a) The commission

may require a telecommunications provider to provide a report or
information necessary to assess contributions and disbursements to
the universal service fund.
(b) A report or information the commission requires a
telecommunications provider to provide under Subsection (a) is
confidential and not subject to disclosure under Chapter 552,
Government Code.
(c) A telecommunications provider shall file with the
commission the provider's annual earnings report if the provider:
(1) is not a local exchange company subject to a total
support reduction plan under 16 T.A.C. Section 26.403 or that has
made an election under Section 56.023(l);
(2) serves greater than 31,000 access lines; and
(3) receives support under a plan established under Section
56.021(1).

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(d) A report filed under Subsection (c) is confidential and not

subject to disclosure under Chapter 552, Government Code.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 1212, Sec. 24, eff. Sept. 1, 1999.
Amended by:
Acts 2013, 83rd Leg., R.S., Ch. 751 (S.B. 583), Sec. 2, eff. June
14, 2013.

Sec. 56.025. MAINTENANCE OF RATES AND EXPANSION OF FUND FOR

CERTAIN COMPANIES. (a) In addition to the authority provided by
Section 56.021:
(1) for each local exchange company that serves fewer than
31,000 access lines and each cooperative, the commission may adopt a
mechanism necessary to maintain reasonable rates for local exchange
telephone service; and
(2) for each local exchange company and each cooperative
that serves 31,000 or fewer access lines and that on June 1, 2013, is
not an electing company under Chapter 58 or 59, the commission shall
adopt rules to expand the universal service fund in the circumstances
prescribed by this section.
(b) The commission shall implement a mechanism through the
universal service fund to replace the reasonably projected reduction
in high cost assistance revenue caused by a commission order, rule,
or policy. This subsection does not apply to an order entered in a
proceeding related to an individual company's revenue requirements.
(c) The commission shall implement a mechanism to replace the
reasonably projected change in revenue caused by a Federal
Communications Commission order, rule, or policy that changes:
(1) the federal universal service fund revenue of a local
exchange company; or
(2) costs or revenue assigned to the intrastate
jurisdiction.
(d) The commission shall implement a mechanism to replace the
reasonably projected reduction in contribution caused by a change of
commission policy regarding intraLATA "1-plus" dialing access. In
this subsection, "contribution" means the average intraLATA long
distance message telecommunications service revenue per minute,
including intraLATA toll pooling and associated impacts, less the

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average message telecommunications service cost per minute less the

average contribution from switched access multiplied by the projected
change in intraLATA "1-plus" minutes of use.
(e) The commission shall implement a mechanism to replace the
reasonably projected increase in costs or decrease in revenue of the
intrastate jurisdiction caused by another governmental agency's
order, rule, or policy.
(f) A mechanism implemented under Subsection (c), (d), or (e)
must be through:
(1) an increase in rates, if the increase would not
adversely affect universal service; or
(2) the universal service fund.
(g) Notwithstanding any other provision of this section, after
December 31, 2013, the commission may not distribute support granted
under this section, including any support granted before that date,
to a local exchange company or cooperative that serves greater than
31,000 access lines or that is an electing company under Chapter 58
or 59 on June 1, 2013.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 13, eff.
September 7, 2005.
Acts 2013, 83rd Leg., R.S., Ch. 751 (S.B. 583), Sec. 3, eff. June
14, 2013.

Sec. 56.026. PROMPT AND EFFICIENT DISBURSEMENTS. The

commission shall make each disbursement from the universal service
fund promptly and efficiently so that a telecommunications provider
does not experience an unnecessary cash-flow change as a result of a
change in governmental policy.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 1212, Sec. 25, eff. Sept. 1, 1999.
Amended by:
Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 14, eff.
September 7, 2005.
Acts 2013, 83rd Leg., R.S., Ch. 751 (S.B. 583), Sec. 4, eff. June
14, 2013.

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Sec. 56.028. UNIVERSAL SERVICE FUND REIMBURSEMENT FOR CERTAIN

INTRALATA SERVICE. On request of an incumbent local exchange company
that is not an electing company under Chapters 58 and 59, the
commission shall provide reimbursement through the universal service
fund for reduced rates for intraLATA interexchange high capacity
(1.544 Mbps) service for entities described in Section 58.253(a).
The amount of reimbursement shall be the difference between the
company's tariffed rate for that service as of January 1, 1998, and
the lowest rate offered for that service by any local exchange
company electing incentive regulation under Chapter 58.

Added by Acts 1999, 76th Leg., ch. 1212, Sec. 26, eff. Sept. 1, 1999.

Sec. 56.030. AFFIDAVITS OF COMPLIANCE. On or before September

1 of each year, a telecommunications provider that receives
disbursements from the universal service fund shall file with the
commission an affidavit certifying that the telecommunications
provider is in compliance with the requirements for receiving money
from the universal service fund and requirements regarding the use of
money from each universal service fund program for which the
telecommunications provider receives disbursements.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 15, eff.
September 7, 2005.

Sec. 56.031. ADJUSTMENTS: TEXAS HIGH COST UNIVERSAL SERVICE

PLAN. The commission may revise the monthly per line support amounts
to be made available from the Texas High Cost Universal Service Plan
after notice and an opportunity for hearing. In determining
appropriate monthly per line support amounts, the commission shall
consider the adequacy of basic rates to support universal service.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 15, eff.
September 7, 2005.
Amended by:
Acts 2011, 82nd Leg., R.S., Ch. 535 (H.B. 2603), Sec. 1, eff.
September 1, 2011.
Acts 2013, 83rd Leg., R.S., Ch. 751 (S.B. 583), Sec. 6, eff. June
14, 2013.

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For expiration of Subsections (a), (c), (d), and (e)–(m), see

Subsection (n).
Sec. 56.032. ADJUSTMENTS: SMALL AND RURAL INCUMBENT LOCAL
EXCHANGE COMPANY UNIVERSAL SERVICE PLAN. (a) In this section:
(1) "Rate of return" means the Federal Communications
Commission's prescribed rate of return as of the date of any
determination, review, or adjustment under this section, to be no
greater than 9.75 percent prior to July 1, 2021. If the commission
finds that the Federal Communications Commission no longer prescribes
a rate of return necessary to implement this section, the commission
shall initiate proceedings to determine or modify the rate of return
to be used for purposes of this section as necessary.
(2) "Small provider" means:
(A) an incumbent local exchange company or cooperative
that, on September 1, 2013, together with all local exchange
companies affiliated with the company or cooperative on that date,
served 31,000 or fewer access lines in this state; or
(B) a company or cooperative that is a successor to a
company or cooperative described by Paragraph (A).
(b) Except as provided by Subsections (c) through (j), the
commission may revise the monthly support amounts to be made
available from the Small and Rural Incumbent Local Exchange Company
Universal Service Plan by any mechanism, including support reductions
resulting from rate rebalancing approved by the commission, after
notice and an opportunity for hearing. In determining appropriate
monthly support amounts, the commission shall consider the adequacy
of basic rates to support universal service.
(c) On the written request of a small provider that is not an
electing company under Chapter 58 or 59, the commission shall
determine and disburse support to the small provider in fixed monthly
amounts based on an annualized support amount the commission
determines to be sufficient, when combined with regulated revenues,
to permit the small provider the opportunity to earn a reasonable
return in accordance with Section 53.051. A small provider that
makes a request under this subsection shall continue to receive the
same level of support it was receiving on the date of the written
request until the commission makes a determination or adjustment
through the mechanism described by Subsection (d).

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(d) Not later than January 1, 2018, the commission shall

initiate rulemaking proceedings to develop and implement a mechanism
to determine the annualized support amount to be disbursed under
Subsection (c). The mechanism must:
(1) require the annual filing of a report by each small
provider that submits a request under Subsection (c) for the purpose
of:
(A) establishing a continued level of support for the
provider or the eligibility of the provider for support adjustment
filings for the purposes of Subsections (f), (g), (h), and (i); and
(B) determining whether support levels, when combined
with regulated revenues, provide the provider an opportunity to earn
a reasonable return as described by Subsection (f);
(2) provide requirements for the annual filing, which may
include annual earnings reports filed with the commission under 16
T.A.C. Section 26.73 and any underlying data that, during the
rulemaking process, the commission determines to be reasonably
necessary for the purposes of Subdivision (1);
(3) provide requirements and procedures for adjustment
proceedings that are consistent with Subsections (h) and (i); and
(4) provide a procedure for the commission to assess, as
necessary, whether the reported return of a small provider is based
on expenses that are not reasonable and necessary.
(d-1) In addition to the report required by Subsection (d), a
small provider that submits a request under Subsection (c) shall file
with the commission annually a report that includes the following
information regarding the provider's operations that are regulated by
the commission:
(1) total operating revenues;
(2) total operating expenses;
(3) total operating tax expense;
(4) rate of return;
(5) total invested capital; and
(6) network access revenue.
(d-2) A small provider shall file the report required by
Subsection (d-1) using the commission's public filing system.
Subsection (k) does not apply to information in a report filed under
Subsection (d-1).
(e) In a proceeding to adjust support levels using the
mechanism described by Subsection (d), the commission may consider

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the small provider's data for a period not to exceed three fiscal
years before the date the proceeding is initiated.
(f) For purposes of the mechanism described by Subsection (d),
a return is deemed reasonable if the return is within two percentage
points above or three percentage points below the rate of return as
defined in this section. A small provider's reported return is
subject to assessment under the procedures described in Subsection
(d)(4).
(g) The commission may not approve a support adjustment under
Subsection (h) or (i) if the commission determines that a small
provider's return for the previous fiscal year was reasonable under
Subsection (f).
(h) A small provider whose return is not reasonable under
Subsection (f) because the return is more than three percentage
points below the rate of return as defined in this section may file
an application that is eligible for administrative review or informal
disposition to adjust support or rates to a level that would bring
the small provider's return into the range that would be deemed
reasonable under Subsection (f), except that the adjustment may not
set a small provider's support level at more than 140 percent of the
annualized support amount the provider received in the 12-month
period before the date of adjustment. A rate adjustment under this
subsection may not adversely affect universal service. Except for
good cause, a small provider that files an application for adjustment
under this subsection may not file a subsequent application for
adjustment before the third anniversary of the date on which the
small provider's most recent application for adjustment is initiated.
(i) There is no presumption that the return is unreasonable for
a small provider whose return is more than two percentage points
above the rate of return as defined in this section. However, on its
own motion, the commission may initiate a proceeding to review the
small provider's support level and regulated revenues and after
notice and an opportunity for a hearing, adjust the provider's level
of support or rates, if appropriate. A rate adjustment under this
subsection may not adversely affect universal service. Except for
good cause, the commission may not initiate a subsequent adjustment
proceeding for a small provider under this subsection before the
third anniversary of the date on which the small provider's most
recent adjustment proceeding is initiated.
(j) A small provider that is eligible to have support

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determined and distributed under Subsection (c) shall continue to

receive the same level of support it was receiving on August 31,
2017, until the earlier of:
(1) the date on which the commission makes a determination
or adjustment through the mechanism described by Subsection (d); or
(2) the 61st day after the date the commission adopts the
mechanism described by Subsection (d).
(k) A report or information the commission requires a small
provider to provide under Subsection (d) is confidential and is not
subject to disclosure under Chapter 552, Government Code. In any
proceeding related to Subsection (d), a third party's access to
confidential information is subject to an appropriate protective
order.
(l) Except as provided by Subsection (m), this section does
not:
(1) affect the commission's authority under Chapter 53 or
this chapter; or
(2) limit the commission's authority to initiate a review
of a small provider under another provision of this title.
(m) In a proceeding for a small provider initiated under
Subchapter A, B, C, or D, Chapter 53, the commission may recalculate
the annualized support amount to be disbursed to the small provider
and to be used as the basis for adjustment in any subsequent
proceeding under Subsections (c) through (j).
(n) Subsections (a), (c), (d), (e), (f), (g), (h), (i), (j),
(k), (l), and (m) and any monthly amounts approved under those
subsections expire September 1, 2033.

Added by Acts 2011, 82nd Leg., R.S., Ch. 535 (H.B. 2603), Sec. 2, eff.
September 1, 2011.
Amended by:
Acts 2013, 83rd Leg., R.S., Ch. 751 (S.B. 583), Sec. 5, eff. June
14, 2013.
Acts 2017, 85th Leg., R.S., Ch. 1116 (S.B. 586), Sec. 1, eff.
September 1, 2017.
Acts 2023, 88th Leg., R.S., Ch. 57 (S.B. 1425), Sec. 1, eff. May
19, 2023.

Sec. 56.033. SUPPORT AVAILABLE TO DEREGULATED MARKETS. (a) An

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incumbent local exchange company may not receive support from the
universal service fund for a deregulated market that has a population
of at least 30,000.
(b) An incumbent local exchange company may receive support
from the universal service fund for a deregulated market that has a
population of less than 30,000 only if the company demonstrates to
the commission that the company needs the support to provide basic
local telecommunications service at reasonable rates in the affected
market. A company may use evidence from outside the affected market
to make the demonstration.
(c) An incumbent local exchange company may make the
demonstration described by Subsection (b) in relation to a market
before submitting a petition to deregulate the market.

Added by Acts 2011, 82nd Leg., R.S., Ch. 98 (S.B. 980), Sec. 11, eff.
January 2, 2012.
Redesignated from Utilities Code, Section 56.032 by Acts 2013, 83rd
Leg., R.S., Ch. 161 (S.B. 1093), Sec. 22.001(54), eff. September 1,
2013.

SUBCHAPTER D. STATEWIDE TELECOMMUNICATIONS RELAY ACCESS SERVICE

Sec. 56.101. PURPOSE. The purpose of this subchapter is to
provide for the uniform and coordinated provision by one
telecommunications carrier of a statewide telecommunications relay
access service for persons with an impairment of hearing or speech.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 56.102. TELECOMMUNICATIONS RELAY ACCESS SERVICE. (a) The

commission shall adopt and enforce rules establishing a statewide
telecommunications relay access service for the use of a person with
an impairment of hearing or speech.
(b) The commission rules shall provide that the service must:
(1) use specialized communications equipment, such as a
telecommunications device for the deaf, and operator translations;
and
(2) meet the criteria provided by Sections 56.103, 56.104,
and 56.105.

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Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 56.103. TELECOMMUNICATIONS RELAY ACCESS SERVICE

REQUIREMENTS. (a) The telecommunications relay access service shall
provide a person with an impairment of hearing or speech with access
to the telecommunications network in this state equivalent to the
access provided other customers.
(b) The service consists of:
(1) switching and transmission of the call;
(2) live or automated verbal and print translations of
communications between a person with an impairment of hearing or
speech who uses a telecommunications device for the deaf or a similar
automated device and a person who does not have such equipment; and
(3) other service enhancements proposed by the carrier and
approved by the commission.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 56.104. TELECOMMUNICATIONS RELAY ACCESS SERVICE CHARGES.

(a) For a call made using the telecommunications relay access
service, the person calling or called:
(1) may not be charged for a call that originates and
terminates in the same local calling area; and
(2) shall pay one-half of the total charges established by
contract with the commission for intrastate interexchange calls.
(b) Charges related to providing the service that, under
Subsection (a), are not charged to a person calling or called shall
be funded from the universal service fund, as specified by the
service provider's contract with the commission.
(c) A local exchange company may not impose an interexchange
carrier access charge on a call using the service that originates and
terminates in the same local calling area.
(d) A local exchange company shall provide billing and
collection services for the service at just and reasonable rates.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 56.105. TRIAL SERVICE COSTS AND DESIGN INFORMATION. If

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the commission orders a local exchange company to provide for a trial

telecommunications relay access service for persons with an
impairment of hearing or speech, all pertinent costs and design
information from the trial must be made available to the public.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 56.106. TELECOMMUNICATIONS RELAY ACCESS SERVICE

ASSESSMENTS. (a) The commission shall set appropriate assessments
for all telecommunications utilities to fund the telecommunications
relay access service.
(b) In setting an assessment, the commission shall consider:
(1) the aggregate calling pattern of service users; and
(2) any other factor the commission finds appropriate and
in the public interest.
(c) The commission shall:
(1) review the assessments annually; and
(2) adjust the assessments as appropriate.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 56.107. UNIVERSAL SERVICE FUND SURCHARGE. (a) A

telecommunications utility may recover the utility's universal
service fund assessment for the telecommunications relay access
service through a surcharge added to the utility customers' bills.
(b) The commission shall specify how each telecommunications
utility is to determine the amount of the surcharge.
(c) If a telecommunications utility imposes the surcharge, the
bill shall list the surcharge as the "universal service fund
surcharge."

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 56.108. SELECTION OF TELECOMMUNICATIONS RELAY ACCESS

SERVICE CARRIER. (a) The commission shall select one
telecommunications carrier to provide the statewide
telecommunications relay access service.
(b) The commission shall make a written award of the contract

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to the telecommunications carrier whose proposal is the most

advantageous to this state, considering:
(1) price;
(2) the interests of the community of persons with an
impairment of hearing or speech in having access to a high quality
and technologically advanced telecommunications system; and
(3) any other factor listed in the commission's request for
proposals.
(c) The commission shall consider each proposal in a manner
that does not disclose the contents of the proposal to a
telecommunications carrier making a competing proposal.
(d) The commission's evaluation of a telecommunications
carrier's proposal shall include the:
(1) charges for the service;
(2) service enhancements proposed by the carrier;
(3) technological sophistication of the network proposed by
the carrier; and
(4) date proposed for beginning the service.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 56.1085. SPECIAL FEATURES FOR RELAY ACCESS SERVICE. (a)

The commission may contract for a special feature for the state's
telecommunications relay access service if the commission determines:
(1) the feature will benefit the communication of persons
with an impairment of hearing or speech;
(2) installation of the feature will be of benefit to the
state; and
(3) the feature will make the relay access service
available to a greater number of users.
(b) If the carrier selected to provide the telecommunications
relay access service under Section 56.108 is unable to provide the
special feature at the best value to the state, the commission may
make a written award of a contract for a carrier to provide the
special feature to the telecommunications carrier whose proposal is
most advantageous to the state, considering:
(1) the factors provided by Section 56.108(b); and
(2) the past performance, demonstrated capability, and
experience of the carrier.

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(c) The commission shall consider each proposal in a manner

that does not disclose the contents of the proposal to a
telecommunications carrier making a competing proposal.
(d) The commission's evaluation of a telecommunications
carrier's proposal shall include the considerations provided by
Section 56.108(d).

Added by Acts 1999, 76th Leg., ch. 1553, Sec. 2, eff. Sept. 1, 1999.

Sec. 56.109. COMPENSATION OF CARRIER. (a) The

telecommunications carrier selected to provide the telecommunications
relay access service under Section 56.108 or the carrier selected to
provide a special feature for the telecommunications relay access
service under Section 56.1085 shall be compensated at rates and on
terms provided by the carrier's contract with the commission.
(b) The compensation may include:
(1) a return on the investment required to provide the
service; and
(2) compensation for unbillable or uncollectible calls
placed through the service.
(c) Compensation for unbillable or uncollectible calls is
subject to a reasonable limitation determined by the commission.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 1553, Sec. 3, eff. Sept. 1, 1999.

Sec. 56.110. ADVISORY COMMITTEE. (a) An advisory committee to

assist the commission in administering this subchapter is composed of
the following persons appointed by the commission:
(1) two persons with disabilities that impair the ability
to effectively access the telephone network other than disabilities
described by Subdivisions (2)-(7);
(2) one deaf person recommended by the Texas Deaf Caucus;
(3) one deaf person recommended by the Texas Association of
the Deaf;
(4) one person with a hearing impairment recommended by
Self-Help for the Hard of Hearing;
(5) one person with a hearing impairment recommended by the
American Association of Retired Persons;

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(6) one deaf and blind person recommended by the Texas

Deaf/Blind Association;
(7) one person with a speech impairment and one person with
a speech and hearing impairment recommended by the Coalition of
Texans with Disabilities;
(8) two representatives of telecommunications utilities,
one representing a nonlocal exchange utility and one representing a
local exchange company, chosen from a list of candidates provided by
the Texas Telephone Association;
(9) two persons, at least one of whom is deaf, with
experience in providing relay services recommended by the department;
and
(10) two public members recommended by organizations
representing consumers of telecommunications services.
(b) Members of the advisory committee serve two-year terms. A
member whose term has expired shall continue to serve until a
qualified replacement is appointed.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 62, Sec. 18.08(b), eff. Sept. 1, 1999;
Acts 1999, 76th Leg., ch. 1553, Sec. 4, eff. Sept. 1, 1999.
Amended by:
Acts 2013, 83rd Leg., R.S., Ch. 532 (S.B. 512), Sec. 4, eff.
September 1, 2013.

Sec. 56.111. ADVISORY COMMITTEE DUTIES. The advisory committee

shall:
(1) monitor the establishment, administration, and
promotion of the statewide telecommunications relay access service;
(2) advise the commission in pursuing a service that meets
the needs of persons with an impairment of hearing or speech in
communicating with other telecommunications services users; and
(3) advise the department, at that department's request,
regarding any issue related to the specialized telecommunications
assistance program established under Subchapter E, including:
(A) devices or services suitable to meet the needs of
persons with disabilities in communicating with other users of
telecommunications services; and
(B) oversight and administration of the program.

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Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 62, Sec. 18.08(c), eff. Sept. 1, 1999;
Acts 1999, 76th Leg., ch. 1553, Sec. 5, eff. Sept. 1, 1999.
Amended by:
Acts 2013, 83rd Leg., R.S., Ch. 532 (S.B. 512), Sec. 5, eff.
September 1, 2013.

Sec. 56.112. ADVISORY COMMITTEE SUPPORT AND COSTS. (a) The

commission shall provide to the advisory committee:
(1) clerical and staff support; and
(2) a secretary to record committee meetings.
(b) The costs associated with the advisory committee shall be
reimbursed from the universal service fund.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 62, Sec. 18.08(d), eff. Sept. 1, 1999.

Sec. 56.113. ADVISORY COMMITTEE COMPENSATION AND EXPENSES. A

member of the advisory committee serves without compensation but is
entitled to reimbursement at rates established for state employees
for travel and per diem incurred in the performance of the member's
official duties.

Added by Acts 2001, 77th Leg., ch. 1158, Sec. 93, eff. Sept. 1, 2001.

SUBCHAPTER E. SPECIALIZED TELECOMMUNICATIONS ASSISTANCE PROGRAM

Sec. 56.151. SPECIALIZED TELECOMMUNICATIONS ASSISTANCE PROGRAM.
(a) The executive commissioner, after consulting with the
department, by rule shall establish a specialized telecommunications
assistance program to provide financial assistance to individuals
with disabilities that impair the individuals' ability to effectively
access the telephone network to assist the individuals with the
purchase of basic specialized equipment or services to provide the
individuals with telephone network access that is functionally
equivalent to that enjoyed by individuals without disabilities. The
executive commissioner may adopt rules that identify devices and
services eligible for vouchers under the program.
(b) The department may contract, as necessary, to implement and

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administer the specialized telecommunications assistance program.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 18.08(e), eff. Sept. 1,
1999. Amended by Acts 1999, 76th Leg., ch. 1553, Sec. 7, eff. Sept.
1, 1999; Acts 2001, 77th Leg., ch. 424, Sec. 1, eff. Sept. 1, 2001.
Amended by:
Acts 2013, 83rd Leg., R.S., Ch. 532 (S.B. 512), Sec. 6, eff.
September 1, 2013.

Sec. 56.152. ELIGIBILITY. The executive commissioner, after

consulting with the department, by rule shall prescribe eligibility
standards for individuals, including deaf individuals and individuals
who have an impairment of hearing or speech, to receive an assistance
voucher under the program. To be eligible, an individual must be a
resident of this state with a disability that impairs the
individual's ability to effectively access the telephone network.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 18.08(e), eff. Sept. 1,
1999. Amended by Acts 1999, 76th Leg., ch. 1553, Sec. 7, eff. Sept.
1, 1999; Acts 2001, 77th Leg., ch. 424, Sec. 2, eff. Sept. 1, 2001.
Amended by:
Acts 2013, 83rd Leg., R.S., Ch. 532 (S.B. 512), Sec. 7, eff.
September 1, 2013.

Sec. 56.153. VOUCHERS. (a) The department shall determine a

reasonable price for a basic specialized telecommunications device
that permits, or basic specialized services that permit, telephone
network access and distribute to each eligible applicant a voucher
that guarantees payment of that amount to a distributor of new
specialized telecommunications devices described by Section 56.151 or
to a provider of services described by that section. The department
may issue a voucher for a service only if the service is less
expensive than a device eligible for a voucher under the program to
meet the same need.
(b) A voucher must have the value printed on its face. The
individual exchanging a voucher for the purchase of a specialized
telecommunications device or service is responsible for payment of
the difference between the voucher's value and the price of the
device or service.

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(c) The executive commissioner, after consulting with the

department, by rule shall provide that a distributor of devices or a
provider of services will receive not more than the full price of the
device or service if the recipient of a voucher exchanges the voucher
for a device or service that the distributor or provider sells for
less than the voucher's value.
(d) An individual who has exchanged a voucher for a specialized
telecommunications device is not eligible to receive another voucher
before the fifth anniversary of the date the individual exchanged the
previously issued voucher unless, before that date, the recipient
develops a need for a different type of telecommunications device or
service under the program because the recipient's disability changes
or the recipient acquires another disability.
(e) Except as provided by rules adopted under this subsection,
an individual is not eligible for a voucher if the department has
issued a voucher for a device or service to another individual with
the same type of disability in the individual's household. The
executive commissioner, after consulting with the department, by rule
may provide for financially independent individuals who reside in a
congregate setting to be eligible for a voucher regardless of whether
another individual living in that setting has received a voucher.
(f) The department shall determine eligibility of each person
who files an application for a voucher and issue each eligible
applicant an appropriate voucher.
(g) The department shall maintain a record regarding each
individual who receives a voucher under the program.
(h) The department shall deposit money collected under the
program to the credit of the universal service fund.

Acts 1999, 76th Leg., ch. 62, Sec. 18.08(e), eff. Sept. 1, 1999.
Amended by Acts 1999, 76th Leg., ch. 1553, Sec. 7, eff. Sept. 1,
1999; Acts 2001, 77th Leg., ch. 424, Sec. 3, eff. Sept. 1, 2001.
Amended by:
Acts 2013, 83rd Leg., R.S., Ch. 532 (S.B. 512), Sec. 8, eff.
September 1, 2013.

Sec. 56.154. DEPARTMENT DUTIES. (a) Not later than the 45th
day after the date the department receives a voucher a
telecommunications device distributor presents for payment or a

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voucher a telecommunications service provider presents for payment,

the department shall pay to the distributor or service provider the
lesser of the value of a voucher properly exchanged for a specialized
telecommunications device or service or the full price of the device
or service for which a voucher recipient exchanges the voucher. The
payments must be made from the universal service fund.
(b) The department may investigate whether the presentation of
a voucher for payment represents a valid transaction for a
telecommunications device or service under the program.
(c) Notwithstanding Section 56.153(a), the department may:
(1) delay payment of a voucher to a distributor of devices
or a service provider if there is a dispute regarding the amount or
propriety of the payment or whether the device or service is
appropriate or adequate to meet the needs of the person to whom the
department issued the voucher until the dispute is resolved;
(2) provide that payment of the voucher is conditioned on
the return of the payment if the device is returned to the
distributor or if the service is not used by the person to whom the
voucher was issued; and
(3) provide an alternative dispute resolution process for
resolving a dispute regarding a subject described by Subdivision (1)
or (2).
(d) The executive commissioner, after consulting with the
department, may adopt rules to implement this section.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 18.08(e), eff. Sept. 1,
1999. Amended by Acts 1999, 76th Leg., ch. 1553, Sec. 7, eff. Sept.
1, 1999.
Amended by:
Acts 2013, 83rd Leg., R.S., Ch. 532 (S.B. 512), Sec. 9, eff.
September 1, 2013.

Sec. 56.155. RECOVERY OF SPECIALIZED TELECOMMUNICATIONS DEVICE

ASSISTANCE PROGRAM SURCHARGE. (a) The commission shall allow a
telecommunications utility to recover the universal service fund
assessment related to the specialized telecommunications assistance
program through a surcharge added to the utility's customers' bills.
(b) The commission shall specify how each utility must
determine the amount of the surcharge and by rule shall prohibit a

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utility from recovering an aggregation of more than 12 months of

assessments in a single surcharge. The rules must require a utility
to apply for approval of a surcharge before the 91st day after the
date the period during which the aggregated surcharges were assessed
closes.
(c) If a utility chooses to impose the surcharge, the utility
shall include the surcharge in the "universal service fund surcharge"
listing as provided by Section 56.107.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 18.08(e), eff. Sept. 1,
1999. Amended by Acts 1999, 76th Leg., ch. 1553, Sec. 8, eff. Sept.
1, 1999.

Sec. 56.156. PROMOTION OF PROGRAM. The department may promote

the program established under this subchapter by means of
participation in events, advertisements, pamphlets, brochures, forms,
pins, or other promotional items or efforts that provide contact
information for persons interested in applying for a voucher under
the program.

Added by Acts 2001, 77th Leg., ch. 424, Sec. 4, eff. Sept. 1, 2001.
Amended by:
Acts 2013, 83rd Leg., R.S., Ch. 532 (S.B. 512), Sec. 10, eff.
September 1, 2013.

SUBCHAPTER F. SERVICE TO UNCERTIFICATED AREA

Sec. 56.201. DEFINITION. In this subchapter, "permanent
residential or business premises" means a premises that has permanent
facilities for water, wastewater, and electricity.

Added by Acts 2001, 77th Leg., ch. 651, Sec. 4, eff. Sept. 1, 2001.

Sec. 56.202. DESIGNATION OF PROVIDER. (a) Notwithstanding

Section 54.001, the commission may designate a telecommunications
provider under this section to provide voice-grade services to
permanent residential or business premises that are not included
within the certificated area of a holder of a certificate of
convenience and necessity.

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(b) The commission may designate a provider only if the

provider is otherwise eligible to receive universal service funds
under Section 56.023(b).

Added by Acts 2001, 77th Leg., ch. 651, Sec. 4, eff. Sept. 1, 2001.

Sec. 56.203. PETITION FOR SERVICE. Persons residing in

permanent residential premises or owners of permanent residential or
business premises that are not included within the certificated area
of a holder of a certificate of convenience and necessity may
petition the commission to designate a telecommunications provider to
provide to those premises voice-grade services supported by state and
federal universal service support mechanisms.

Added by Acts 2001, 77th Leg., ch. 651, Sec. 4, eff. Sept. 1, 2001.

Sec. 56.204. CONTENTS OF PETITION. (a) A petition for

designation of a service provider must:
(1) state with reasonable particularity the locations of
the permanent residential or business premises for which the
petitioners are requesting service;
(2) establish that those locations are within reasonable
proximity to one another so that the petitioners possess a sufficient
community of interest to warrant the designation of a provider and
the expenditure of universal service funds necessary to establish
service;
(3) except as provided by Subsection (b), be signed by at
least five persons who:
(A) are not members of the same household;
(B) reside in the permanent residential premises or are
the owners of the permanent residential or business premises for
which service is sought and that are not located within a
certificated area;
(C) want service to those premises; and
(D) commit to pay the aid to construction charges for
service to those premises as determined by the commission;
(4) nominate as potential providers of service not more
than five telecommunications providers serving territory that is
contiguous to the location of the permanent residential or business

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premises using wireless or wireline facilities, resale, or unbundled

network elements; and
(5) include as an attachment or an appendix documentation
indicating the required residence or ownership, including a state-
issued license or identification, tax records, deeds, or voter
registration materials.
(b) The commission may accept a petition that is signed by
fewer than five persons if a petitioner provides an affidavit stating
that the petitioners have taken all reasonable steps to secure the
signatures of the residents of permanent residential premises or the
owners of permanent residential or business premises within
reasonably close proximity to the petitioning premises who are not
receiving telephone service when the petition is filed and who want
telephone service initiated.

Added by Acts 2001, 77th Leg., ch. 651, Sec. 4, eff. Sept. 1, 2001.

Sec. 56.205. HEARING. If the commission finds that the

petition complies with Section 56.204, the commission shall hold an
evidentiary hearing to determine if a telecommunications provider is
willing to be designated to provide service to those premises or, if
a provider is not willing to be designated, to determine the
telecommunications provider that is best able to serve those premises
under the criteria prescribed by this subchapter.

Added by Acts 2001, 77th Leg., ch. 651, Sec. 4, eff. Sept. 1, 2001.

Sec. 56.206. DENIAL OF PETITION. The commission shall deny a

petition if the commission determines that services cannot be
extended to the petitioning premises at a reasonable cost. In making
that determination, the commission shall consider all relevant
factors, including:
(1) the original cost to be incurred by a designated
provider to deploy service to the petitioning premises, and the
effect of reimbursement of those costs on the state universal service
fund;
(2) the number of access lines requested by the petitioners
for the petitioning premises;
(3) the size of the geographic territory in which the

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petitioning premises are included;

(4) the proximity of existing facilities and the existence
of a preferred designated provider under Section 56.213; and
(5) any technical barriers to the provision of service.

Added by Acts 2001, 77th Leg., ch. 651, Sec. 4, eff. Sept. 1, 2001.

Sec. 56.207. ORDER. In any order granting a petition, the

commission shall:
(1) approve the facilities to be deployed based on the
estimated costs of deployment submitted in accordance with Section
56.208(a);
(2) approve the amount of original cost of deployment to be
recovered from the state universal service fund and the terms of
original cost recovery under Section 56.209; and
(3) approve the recurring cost recovery under Section
56.209, including the monthly rate for services and the monthly per
line fee to be recovered from the state universal service fund under
that section.

Added by Acts 2001, 77th Leg., ch. 651, Sec. 4, eff. Sept. 1, 2001.

Sec. 56.208. DESIGNATION OF PROVIDER. (a) In determining

which nominated telecommunications provider the commission will
designate to provide service to the petitioning premises, the
commission shall consider the relative estimated cost to be incurred
by contiguous providers to serve the petitioning premises and give
preference to the provider having the least cost technology that
meets the quality of service standards prescribed by the commission
applicable to that provider.
(b) The commission may not designate a telecommunications
provider to serve the petitioning premises unless the premises are
located in an area that is contiguous to an area in which the
telecommunications provider has previously been designated eligible
to receive universal service funding under Section 56.023(b). This
subsection does not apply if the commission designates the provider
after the provider voluntarily agrees to provide service to the
petitioning premises.

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Added by Acts 2001, 77th Leg., ch. 651, Sec. 4, eff. Sept. 1, 2001.

Sec. 56.209. RECOVERY OF COSTS. (a) If, after a hearing, the

commission designates a telecommunications provider to serve the
petitioning premises, the commission shall permit the designated
provider to recover from the state universal service fund the
provider's actual costs of providing service to the premises,
including the provider's original cost of deployment and actual
recurring costs.
(b) The reimbursable original cost of deploying facilities to
the petitioning premises is the original cost of the
telecommunications provider's facilities installed in, or upgraded to
permit the provision of service to, the petitioning premises as
determined by the financial accounting standards applicable to the
provider, including an amount for the recovery of all costs that are
typically included as capital costs for accounting purposes, that are
not recovered through an aid to construction charge assessed to the
petitioners. The final order permitting or requiring the designated
provider to provide service to the petitioning premises shall ensure
that all the original cost of the provider shall be amortized and
recovered from the state universal service fund, together with
interest at the prevailing commercial lending rate:
(1) not later than the third anniversary of the date of the
order, for a deployment with an original cost of $1 million or less;
(2) not later than the fifth anniversary of the date of the
order, for a deployment with an original cost of more than $1
million, but not more than $2 million; and
(3) not later than the seventh anniversary of the date of
the order, for a deployment with an original cost of more than $2
million.
(c) The designated provider shall recover the provider's actual
recurring costs of service, including maintenance and the ongoing
operational costs of providing service after deployment of the
facilities to the petitioning premises and a reasonable operating
margin, from:
(1) the monthly rate charged the customer; and
(2) a monthly per line state universal service fund payment
in an amount equal to the unrecovered recurring costs incurred in
providing service divided by the access lines served in the

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petitioning premises.
(d) The monthly per line fee established under Subsection (c)
is in addition to the universal service funds associated with the
recovery of the original cost of deployment and interest authorized
by Subsection (b) and in addition to the universal service funds the
designated provider receives to provide service in other areas of
this state.
(e) The commission may not authorize or require any services to
be provided to petitioning premises under this subchapter during a
fiscal year if the total amount of required reimbursements of actual
original cost of deployment to all approved petitioning premises
under this section, together with interest, including obligations for
reimbursements from preceding years, would equal an amount that
exceeds 0.02 percent of the annual gross revenues reported to the
state universal service fund during the preceding fiscal year.

Added by Acts 2001, 77th Leg., ch. 651, Sec. 4, eff. Sept. 1, 2001.

Sec. 56.210. AID TO CONSTRUCTION CHARGE; CONTRACT FOR

SERVICES. The commission shall establish a reasonable aid to
construction charge, not to exceed $3,000, to be assessed each
petitioner. The commission may not require a designated provider to
begin construction until:
(1) each petitioner has paid or executed an agreement
acceptable to the provider to pay the aid to construction charge;
and
(2) each petitioner has executed an assignable agreement
for subscription to basic local service to the petitioning premises
from the designated provider for a period at least equal to the
period during which the provider will receive reimbursement for the
original cost of deployment under Section 56.209(b).

Added by Acts 2001, 77th Leg., ch. 651, Sec. 4, eff. Sept. 1, 2001.

Sec. 56.211. PERMANENT PREMISES REQUIRED. A telecommunications

provider may not under any circumstances be required to extend
service to a location that is not a permanent residential or business
premises or be required to provide service to the petitioning
premises before the 180th day after the date the provider was

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designated to provide service to the petitioning premises.

Added by Acts 2001, 77th Leg., ch. 651, Sec. 4, eff. Sept. 1, 2001.

Sec. 56.212. SUBSEQUENT RELATED PETITIONS. (a) If the

commission approves a petition requesting service, residents of
permanent residential premises or owners of permanent residential or
business premises in reasonable proximity to the premises that were
the subject of an approved petition who did not sign the prior
petition requesting service are not entitled to receive service under
this subchapter until the fifth anniversary of the date the prior
petition was filed unless the residents or owners file a new petition
under this subchapter and agree to pay aid to construction charges on
the same terms as applicable to the prior petitioners.
(b) The designated provider shall receive reimbursement for the
original cost of deployment and actual recurring costs of providing
service to those additional residents in the same manner as the
provider received reimbursement of those costs in relation to the
prior petitioners. The provider may not receive reimbursement for
the original cost of deployment under a subsequent petition if the
provider previously received complete reimbursement for those costs
from the state universal service fund. If the state universal
service fund has completely reimbursed the original cost of
deployment as provided by this subchapter, each subsequent petitioner
must pay into the state universal service fund an amount equal to the
aid to construction charge paid by each prior petitioner.

Added by Acts 2001, 77th Leg., ch. 651, Sec. 4, eff. Sept. 1, 2001.

Sec. 56.213. PREFERRED PROVIDER. (a) A provider who is

designated to serve petitioning premises located within an
uncertificated area under this subchapter is the preferred provider
for any permanent residential or business premises in reasonable
proximity to those petitioning premises for later petitions filed
under Section 56.212.
(b) A preferred designated provider is entitled to an
opportunity for a hearing under Section 56.205 on a petition filed
under Section 56.203.

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Added by Acts 2001, 77th Leg., ch. 651, Sec. 4, eff. Sept. 1, 2001.

Sec. 56.214. CERTIFICATE NOT AMENDED. The designation of a

provider to serve permanent residential or business premises within
an uncertificated area under this subchapter does not have the effect
of:
(1) amending the boundaries of the provider's certificate
to provide local exchange service; or
(2) imposing carrier of last resort responsibilities on the
provider.

Added by Acts 2001, 77th Leg., ch. 651, Sec. 4, eff. Sept. 1, 2001.

SUBCHAPTER G. FUNDING FOR CERTAIN TELECOMMUNICATIONS UTILITIES

Sec. 56.251. DEFINITION. In this subchapter, "successor
utility" has the meaning assigned by Section 54.301.

Added by Acts 2003, 78th Leg., ch. 76, Sec. 7, eff. Sept. 1, 2003.

Sec. 56.252. TELECOMMUNICATIONS UTILITIES ELIGIBLE TO RECEIVE

FUNDING UNDER THIS SUBCHAPTER. A telecommunications utility may
receive funding under this subchapter only if:
(1) the telecommunications utility is eligible to receive
universal service funding under Section 56.023(b); and
(2) the telecommunications utility is designated as a
successor utility under Section 54.303.

Added by Acts 2003, 78th Leg., ch. 76, Sec. 7, eff. Sept. 1, 2003.

Sec. 56.253. DETERMINATION OF SUCCESSOR UTILITY'S COSTS TO BE

RECOVERED. (a) At the time the commission designates the successor
utility under Section 54.303, the commission shall determine the
extent to which the utility should recover the costs the utility will
incur in accepting and establishing service to the affected service
area.
(b) In making the determination under Subsection (a), the
commission shall consider relevant information, including the costs

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of acquiring and restoring or upgrading the utility's facilities in

the geographic area as necessary to make those facilities compatible
with the facilities in the utility's other certificated service areas
and to comply with commission quality of service standards.

Added by Acts 2003, 78th Leg., ch. 76, Sec. 7, eff. Sept. 1, 2003.

Sec. 56.254. RECOVERY OF COSTS. The commission order

designating the successor utility under Section 54.303 shall
authorize the utility to recover the costs determined under Section
56.253. The costs may be amortized and recovered from the state
universal service fund, together with interest at the prevailing
commercial lending rate:
(1) not later than the first anniversary of the date of the
order if the costs are not more than $1 million;
(2) not later than the second anniversary of the date of
the order if the costs are more than $1 million but no more than $2
million; and
(3) not later than the third anniversary of the date of the
order if the costs are more than $2 million.

Added by Acts 2003, 78th Leg., ch. 76, Sec. 7, eff. Sept. 1, 2003.

SUBCHAPTER H. AUDIO NEWSPAPER PROGRAM

Sec. 56.301. AUDIO NEWSPAPER ASSISTANCE PROGRAM. The
commission by rule shall establish a program to provide from the
universal service fund financial assistance for a free telephone
service for blind and visually impaired persons that offers the text
of newspapers using synthetic speech. The commission may adopt rules
to implement the program.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 17, eff.
September 7, 2005.

CHAPTER 57. DISTANCE LEARNING AND OTHER ADVANCED SERVICES

SUBCHAPTER A. GENERAL PROVISIONS
Sec. 57.001. CONFLICT OF PROVISIONS. If this chapter conflicts
with another provision of this title, this chapter prevails.

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Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER B. DISTANCE LEARNING AND INFORMATION SHARING

Sec. 57.021. DEFINITIONS. In this subchapter:
(1) "Distance learning" means an instruction, learning, or
training resource, including video, data, voice, or electronic
information, that is:
(A) used by an educational institution predominantly
for instruction, learning, or training; and
(B) transmitted from a site to one or more other sites
by a telecommunications service.
(2) "Educational institution" includes:
(A) an accredited primary or secondary school;
(B) an institution of higher education as defined by
Section 61.003, Education Code;
(C) a private institution of higher education
accredited by a recognized accrediting agency as defined by Section
61.003, Education Code;
(D) the Texas Education Agency and its successors and
assigns;
(E) a regional education service center established and
operated in accordance with Chapter 8, Education Code; or
(F) the Texas Higher Education Coordinating Board and
its successors and assigns.
(3) "Library" means:
(A) a public library or regional library system as
defined by Section 441.122, Government Code; or
(B) a library operated by an institution of higher
education or a school district.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 57.022. REDUCED RATES FOR DISTANCE LEARNING OR INFORMATION

SHARING SERVICES. (a) The commission by rule shall require a
dominant carrier to file a tariff that includes a reduced rate for a
telecommunications service the commission finds is directly related
to:
(1) a distance learning activity that is or could be

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conducted by an educational institution in this state; or

(2) an information sharing program that is or could be
conducted by a library in this state.
(b) The commission rules shall specify:
(1) each telecommunications service to which Subsection (a)
applies;
(2) the process for an educational institution or library
to qualify for a reduced rate;
(3) the date by which a dominant carrier is required to
file a tariff;
(4) guidelines and criteria that require the services and
reduced rates to further the goals prescribed by Section 57.023; and
(5) any other requirement or term that the commission
determines to be in the public interest.
(c) The commission is not required to determine the long run
incremental cost of providing a service before approving a reduced
rate for the service.
(d) Until cost determination rules are developed and the rates
established under this section are changed as necessary to ensure
proper cost recovery, the reduced rates established by the commission
shall be equal to 75 percent of the otherwise applicable rate.
(e) After the commission develops cost determination rules for
telecommunications services generally, the commission shall ensure
that a reduced rate approved under this section:
(1) recovers service-specific long run incremental costs;
and
(2) avoids subsidizing an educational institution or a
library.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 57.023. SERVICE AND RATE REQUIREMENTS. The services and

reduced rates must be designed to:
(1) encourage the development and offering of:
(A) distance learning activities by educational
institutions; and
(B) information sharing programs of libraries;
(2) meet the:
(A) distance learning needs identified by the

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educational community; and

(B) information sharing needs identified by libraries;
and
(3) recover the long run incremental costs of providing the
services, to the extent those costs can be identified, to avoid
subsidizing an educational institution or a library.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 57.024. TARIFF FILINGS. A tariff filed by a dominant

carrier under Section 57.022:
(1) may concern the implementation of this subchapter only;
(2) is not a rate change under Subchapter C, Chapter 53;
and
(3) does not affect the carrier's other rates or services.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 57.025. CHANGES IN RATE PROGRAM. (a) An educational

institution, library, or dominant carrier may request the commission
to:
(1) provide for a reduced rate for a service that:
(A) is directly related to a distance learning activity
or an information sharing program; and
(B) is not covered by commission rules;
(2) change a rate;
(3) amend a tariff; or
(4) amend a commission rule.
(b) The commission shall take the action requested under
Subsection (a) if the commission determines the action is
appropriate.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER D. INTERACTIVE MULTIMEDIA COMMUNICATIONS

Sec. 57.071. DEFINITION. In this subchapter, "interactive
multimedia communications" means real-time, two-way, interactive
voice, video, and data communications conducted over networks that

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link geographically dispersed locations.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 57.072. RATES FOR INTERACTIVE MULTIMEDIA COMMUNICATIONS.

(a) The commission shall permit a local exchange company that
provides an interactive multimedia communications service to
establish, using sound ratemaking principles, rates necessary to
recover costs associated with providing the service.
(b) A local exchange company may not establish a rate under
Subsection (a) that is less than the local exchange company's long
run incremental costs of providing the interactive multimedia
communications service, unless the commission determines it to be in
the public interest to do so.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

CHAPTER 58. INCENTIVE REGULATION

SUBCHAPTER A. GENERAL PROVISIONS
Sec. 58.001. POLICY. Considering the status of competition in
the telecommunications industry, it is the policy of this state to:
(1) provide a framework for an orderly transition from the
traditional regulation of return on invested capital to a fully
competitive telecommunications marketplace in which all
telecommunications providers compete on fair terms;
(2) preserve and enhance universal telecommunications
service at affordable rates;
(3) upgrade the telecommunications infrastructure of this
state;
(4) promote network interconnectivity; and
(5) promote diversity in the supply of telecommunications
services and innovative products and services throughout the entire
state, including urban and rural areas.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 58.002. DEFINITION. In this chapter, "electing company"

means an incumbent local exchange company that elects to be subject

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to incentive regulation and to make the corresponding infrastructure

commitment under this chapter.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 58.003. CUSTOMER-SPECIFIC CONTRACTS. (a) Notwithstanding

any other provision of this chapter, but subject to Subsection (b),
an electing company may not offer in an exchange a service, or an
appropriate subset of a service, listed in Sections 58.051(a)(1)-(4)
or Sections 58.151(1)-(4) in a manner that results in a customer-
specific contract, unless the other party to the contract is a
federal, state, or local governmental entity, until the earlier of
September 1, 2003, or the date on which the commission finds that at
least 40 percent of the total access lines for that service or
appropriate subset of that service in that exchange are served by
competitive alternative providers that are not affiliated with the
electing company.
(b) The requirements prescribed by Subsection (a) do not apply
to an electing company serving fewer than five million access lines
after the date on which it completes the infrastructure improvements
described in this subsection. The electing company must also notify
the commission of the company's binding commitment to make the
following infrastructure improvements not later than September 1,
2000:
(1) install Common Channel Signaling 7 capability in each
central office; and
(2) connect all of the company's serving central offices to
their respective LATA tandem central offices with optical fiber or
equivalent facilities.
(c) The commission by rule shall prescribe appropriate subsets
of services.
(d) An electing company may file with the commission a request
for a finding under this section. The filing must include
information sufficient for the commission to perform a review and
evaluation in relation to the particular exchange and the particular
service or appropriate subset of a service for which the electing
company wants to offer customer-specific contracts. The commission
must grant or deny the request not later than the 60th day after the
date the electing company files the request.

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(e) The commitments described by Subsection (b) do not apply to

exchanges of the company sold or transferred before, or for which
contracts for sale or transfer are pending on, September 1, 2001. In
the case of exchanges for which contracts for sale or transfer are
pending as of March 1, 2001, where the purchaser withdrew or
defaulted before September 1, 2001, the company shall have one year
from the date of withdrawal or default to comply with the
commitments.
(f) This section does not preclude an electing company from
offering a customer-specific contract to the extent allowed by this
title as of August 31, 1999.

Added by Acts 1999, 76th Leg., ch. 1212, Sec. 33, eff. Sept. 1, 1999.

Sec. 58.004. PACKAGING, TERM AND VOLUME DISCOUNTS, AND

PROMOTIONAL OFFERINGS. (a) Notwithstanding any other provision of
this chapter, an electing company that has more than five million
access lines in this state may not offer in an exchange a service
listed in Sections 58.151(1)-(4) as a component of a package of
services or as a promotional offering until the company makes the
reduction in switched access service rates required by Section
58.301(2) unless the customer of one of the pricing flexibility
offerings described in this subsection is a federal, state, or local
governmental entity.
(b) Notwithstanding any other provision of this chapter, an
electing company that has more than five million access lines in this
state may not offer a volume or term discount on any service listed
in Sections 58.151(1)-(4) until September 1, 2000, unless the
customer of one of the pricing flexibility offerings described in
this subsection is a federal, state, or local governmental entity.
(c) Notwithstanding any other provision of this chapter, an
electing company that has more than five million access lines in this
state may offer in an exchange a service listed in Sections
58.051(a)(1)-(4) as a component of a package of services, as a
promotional offering, or with a volume or term discount on and after
September 1, 1999.

Added by Acts 1999, 76th Leg., ch. 1212, Sec. 34, eff. Sept. 1, 1999.

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SUBCHAPTER B. ELECTION OF INCENTIVE REGULATION

Sec. 58.021. ELECTION. (a) An incumbent local exchange
company may elect to be subject to incentive regulation and to make
the corresponding infrastructure commitment under this chapter by
notifying the commission in writing of its election.
(b) The notice must include a statement that the company agrees
to:
(1) limit until September 1, 2005, any increase in a rate
the company charges for basic network services as prescribed by
Subchapter C; and
(2) fulfill the infrastructure commitment prescribed by
Subchapters F and G.
(c) Except as provided in Subsection (d), an election under
this chapter remains in effect until the legislature eliminates the
incentive regulation authorized by this chapter and Chapter 59.
(d) The commission may allow an electing company serving fewer
than five million access lines to withdraw the company's election
under this chapter:
(1) on application by the company; and
(2) only for good cause.
(e) In this section, "good cause" includes only matters beyond
the control of the company.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 1212, Sec. 35, eff. Sept. 1, 1999.

Sec. 58.022. CHAPTER CONTROLS. This chapter governs the

regulation of an electing company's telecommunications services
regardless of whether the company is a dominant carrier.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 58.023. SERVICE CLASSIFICATION. On election, the services

provided by an electing company are classified into two categories:
(1) basic network services governed by Subchapter C; and
(2) nonbasic services governed by Subchapter E.
(3) Renumbered (2) by Acts 1999, 76th Leg., ch. 1212, Sec.
36, eff. Sept. 1, 1999

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Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 1212, Sec. 36, eff. Sept. 1, 1999.

Sec. 58.024. SERVICE RECLASSIFICATION. (a) The commission may

reclassify a basic network service as a nonbasic service.
(b) The commission shall establish criteria for determining
whether a service should be reclassified. The criteria must include
consideration of the:
(1) availability of the service from other providers;
(2) effect of the reclassification on service subscribers;
and
(3) nature of the service.
(c) The commission may not reclassify a service until:
(1) each competitive safeguard prescribed by Subchapters B-
H, Chapter 60, is fully implemented; or
(2) for a company that serves more than five million access
lines in this state, the date on which the Federal Communications
Commission determines in accordance with 47 U.S.C. Section 271 that
the company or any of its affiliates may enter the interLATA
telecommunications market in this state.
(d) The commission may reclassify a service subject to the
following conditions:
(1) the electing company must file a request for a service
reclassification including information sufficient for the commission
to perform a review and evaluation under Subsection (b);
(2) the commission must grant or deny the request not later
than the 60th day after the date the electing company files the
request for service reclassification; and
(3) there is a rebuttable presumption that the request for
service reclassification by the electing company should be granted if
the commission finds that there is a competitive alternative provider
serving customers through means other than total service resale.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 62, Sec. 18.11, eff. Sept. 1, 1999;
Acts 1999, 76th Leg., ch. 1212, Sec. 37, eff. Sept. 1, 1999.

Sec. 58.025. COMPLAINT OR HEARING. (a) An electing company is

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not, under any circumstances, subject to a complaint, hearing, or

determination regarding the reasonableness of the company's:
(1) rates;
(2) overall revenues;
(3) return on invested capital; or
(4) net income.
(b) This section does not prohibit a complaint, hearing, or
determination on an electing company's implementation and enforcement
of a competitive safeguard required by Chapter 60.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 58.026. CONSUMER COMPLAINTS REGARDING TARIFFS. (a) This

chapter does not restrict:
(1) a consumer's right to complain to the commission about
the application of an ambiguous tariff; or
(2) the commission's right to determine:
(A) the proper application of that tariff; or
(B) the proper rate if that tariff does not apply.
(b) This section does not permit the commission to:
(1) lower a tariff rate except as specifically provided by
this title;
(2) change the commission's interpretation of a tariff; or
(3) extend the application of a tariff to a new class of
customers.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 58.027. CONSUMER COMPLAINTS REGARDING SERVICES;

ENFORCEMENT OF STANDARDS. This chapter does not restrict:
(1) a consumer's right to complain to the commission about
quality of service; or
(2) the commission's right to enforce a quality of service
standard.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER C. BASIC NETWORK SERVICES

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Sec. 58.051. SERVICES INCLUDED. (a) Unless reclassified under

Section 58.024, the following services are basic network services:
(1) flat rate residential local exchange telephone service,
including primary directory listings and the receipt of a directory
and any applicable mileage or zone charges;
(2) residential tone dialing service;
(3) lifeline and tel-assistance service;
(4) service connection for basic residential services;
(5) direct inward dialing service for basic residential
services;
(6) private pay telephone access service;
(7) call trap and trace service;
(8) access for all residential and business end users to
911 service provided by a local authority and access to dual party
relay service;
(9) mandatory residential extended area service
arrangements; and
(10) mandatory residential extended metropolitan service or
other mandatory residential toll-free calling arrangements.
(a-1) Notwithstanding Subsection (a) and Section 58.151, basic
network services include residential caller identification services
if the customer to whom the service is billed is at least 65 years of
age.
(b) Electing companies shall offer each basic network service
as a separately tariffed service in addition to any packages or other
pricing flexibility offerings that include those basic network
services.
(c) At the election of the affected incumbent local exchange
company, the price for basic network service shall also include the
fees and charges for any mandatory extended area service
arrangements, mandatory expanded toll-free calling plans, and any
other service included in the definition of basic network service.
(d) A nonpermanent expanded toll-free local calling service
surcharge established by the commission to recover the costs of
mandatory expanded toll-free local calling service:
(1) is considered a part of basic network service;
(2) may not be aggregated under Subsection (c); and
(3) continues to be transitioned in accordance with
commission orders and substantive rules.

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Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 1212, Sec. 39, eff. Sept. 1, 1999.
Amended by:
Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 18, eff.
September 7, 2005.

Sec. 58.052. REGULATION OF SERVICES. (a) Except as provided

by Subchapter E, Chapter 52, basic network services of an electing
company are regulated:
(1) in accordance with this chapter; and
(2) to the extent not inconsistent with this chapter, in
accordance with:
(A) Subtitle A;
(B) Chapters 51, 54, 60, 62, and 63;
(C) Chapter 52, except for Subchapter F;
(D) Subchapters C, D, and E, Chapter 53;
(E) Chapter 55, except for:
(i) Subchapters F and G; and
(ii) Sections 55.001, 55.002, 55.003, and 55.004;
(F) Sections 53.001, 53.003, 53.004, 53.006, 53.065,
55.005, 55.006, 55.009, and 55.010; and
(G) commission rules and procedures.
(b) The commission must approve a change in the terms of the
tariff offering of a basic network service.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 58.053. INVESTMENT LIMITATION ON SERVICE STANDARDS. (a)

The commission may not raise a service standard applicable to the
provision of local exchange telephone service by an electing company
if the increased investment required to comply with the raised
standard in any year exceeds 10 percent of the company's average
annual intrastate additions in capital investment for the most recent
five-year period.
(b) In computing the average under Subsection (a), the company
shall exclude:
(1) extraordinary investments made during the five-year
period; and

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(2) investments required by Section 58.203.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 58.054. RATES CAPPED. (a) As a condition of election

under this chapter, an electing company shall commit to not
increasing a rate for a basic network service on or before the fourth
anniversary of its election date.
(b) The rates an electing company may charge on or before that
fourth anniversary are the rates charged by the company on June 1,
1995, or, for a company that elects under this chapter after
September 1, 1999, the rates charged on the date of its election,
without regard to a proceeding pending under:
(1) Section 15.001;
(2) Subchapter D, Chapter 53; or
(3) Subchapter G, Chapter 2001, Government Code.
(c) Notwithstanding Subsections (a) and (b), the cap on the
rates for basic network services for a company electing under this
chapter may not expire before September 1, 2005.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 1212, Sec. 40, eff. Sept. 1, 1999.

Sec. 58.055. RATE ADJUSTMENT BY COMPANY. (a) An electing

company may increase a rate for a basic network service during the
election period prescribed by Section 58.054 only:
(1) with commission approval that the proposed change is
included in Section 58.056, 58.057, or 58.058; and
(2) as provided by Sections 58.056, 58.057, 58.058, and
58.059.
(b) Notwithstanding Subchapter F, Chapter 60, an electing
company may, on its own initiative, decrease a rate for a basic
network service during the electing period.
(c) The company may decrease the rate for a basic local
telecommunications service to an amount above the service's
appropriate cost. If the company has been required to perform or has
elected to perform a long run incremental cost study, the appropriate
cost for the service is the service's long run incremental cost.

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Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 1212, Sec. 40, eff. Sept. 1, 1999.

Sec. 58.056. RATE ADJUSTMENT FOR CHANGES IN FCC SEPARATIONS.

The commission, on motion of the electing company or on its own
motion, shall proportionally adjust rates for services to reflect
changes in Federal Communications Commission separations that affect
intrastate net income by at least 10 percent.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 58.057. RATE ADJUSTMENT FOR CERTAIN COMPANIES. (a) An

electing company, after the 42nd month after the date the company
elects incentive regulation under this chapter, may file an
application for a commission review of the company's need for changes
in the rates of its services if the company:
(1) has fewer than five million access lines in this state;
and
(2) is complying with:
(A) the company's infrastructure commitment;
(B) each requirement relating to quality of service;
and
(C) each commission rule adopted under Chapter 60.
(b) The company's application may request that the commission
adjust rates, implement new pricing plans, restructure rates, or
rebalance revenues between services to recognize changed market
conditions and the effects of competitive entry.
(c) The commission may use an index and a productivity offset
in determining the requested changes.
(d) The commission may not:
(1) order an increase in the rate for residential local
exchange telephone service that would cause the rate to increase by
more than the United States Consumer Price Index in any 12-month
period; or
(2) set the monthly rate for residential local exchange
telephone service in an amount that exceeds the nationwide average
rates for similar local exchange telephone services.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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Sec. 58.058. RATE GROUP RECLASSIFICATION. Notwithstanding

Subchapter B, the commission, on request of the electing company,
shall allow a rate group reclassification that results from access
line growth.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 58.059. COMMISSION RATE ADJUSTMENT PROCEDURE. (a) In

accordance with this section, an electing company may request and the
commission may authorize a rate adjustment under Section 58.056,
58.057, or 58.058.
(b) The electing company must provide to the commission notice
of its intent to adjust rates. The notice must be accompanied by
sufficient documentary evidence to demonstrate that the rate
adjustment is authorized under Section 58.056, 58.057, or 58.058.
The commission by rule or order shall prescribe the documentation
required under this subsection.
(c) The electing company must also provide notice to its
customers after providing notice to the commission. The notice to
the customers must:
(1) within a reasonable period after notice to the
commission, be published once in a newspaper of general circulation
in the affected service area;
(2) be included in or printed on each affected consumer's
bill in the first billing that occurs after notice is filed with the
commission;
(3) have a title that includes the name of the company and
the words "NOTICE OF POSSIBLE RATE CHANGE"; and
(4) include:
(A) a statement that the consumer's rate may change;
(B) an estimate of the amount of the annual change for
the typical residential, business, or access consumer if the
commission approves the rate change;
(C) a statement that a consumer who wants to comment on
the rate change or who wants additional information regarding the
rate change may call or write the commission and that the information
will be provided without cost to the consumer and at the expense of

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the electing company; and

(D) the commission's telephone number and address.
(d) The estimate of the amount of the annual change required by
Subsection (c)(4)(B) must be printed in a type style and size that is
distinct from and larger than the type style and size of the body of
the notice.
(e) The commission shall review the proposed rates to determine
if the rate adjustment is authorized under Section 58.056, 58.057, or
58.058.
(f) The rate adjustment takes effect on the 90th day after the
date the electing company completes the notice required by this
section unless the commission suspends the effective date under
Subsection (g).
(g) At any time before a rate adjustment is scheduled to take
effect, the commission, on its own motion or on complaint by an
affected party, may suspend the effective date of the rate adjustment
and conduct a hearing to review the proposed adjustment. After the
hearing, the commission may issue an order approving the adjustment,
or if it finds that the adjustment is not authorized under Section
58.056, 58.057, or 58.058, issue an order modifying or rejecting the
adjustment. An order modifying or rejecting a rate adjustment must
specify:
(1) each reason why the proposed adjustment was not
authorized by Section 58.056, 58.057, or 58.058; and
(2) how the proposed adjustment may be changed so that it
is authorized.
(h) Except as provided by this section, a request for a rate
restructure must comply with the notice and hearing requirements
prescribed by Sections 53.101-53.106.
(i) An electing company that has not more than five percent of
the total access lines in this state may adopt as the cost for a
service the cost for the same or substantially similar service
offered by a larger incumbent local exchange company. The electing
company may adopt the larger company's cost only if the cost was
determined based on a long run incremental cost study. An electing
company that adopts a cost under this subsection is not required to
present its own long run incremental cost study to support the
adopted cost.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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Sec. 58.060. RATE ADJUSTMENT AFTER CAP EXPIRATION. After the

expiration of the period during which the rates for basic network
services are capped as prescribed by Section 58.054, an electing
company may increase a rate for a basic network service only:
(1) with commission approval subject to this title; and
(2) to the extent consistent with achieving universal
affordable service.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 1212, Sec. 41, eff. Sept. 1, 1999.

Sec. 58.061. EFFECT ON CERTAIN CHARGES. This subchapter does

not affect a charge permitted under:
(1) Section 55.024;
(2) Subchapter C, Chapter 55; or
(3) Subchapter B, Chapter 56.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 58.063. PRICING AND PACKAGING FLEXIBILITY. (a)

Notwithstanding Section 58.052(b) or Subchapter F, Chapter 60, an
electing company may exercise pricing flexibility for basic network
services, including the packaging of basic network services with any
other regulated or unregulated service or any service of an
affiliate. The company may exercise pricing flexibility in
accordance with this section 10 days after providing an informational
notice to the commission, to the office, and to any person who holds
a certificate of operating authority in the electing company's
certificated area or areas or who has an effective interconnection
agreement with the electing company.
(b) An electing company shall set the price of a package of
services containing basic network services and nonbasic services at
any level at or above the lesser of:
(1) the sum of the long run incremental costs of any basic
network services and nonbasic services contained in the package; or
(2) the sum of the tariffed prices of any basic network
services contained in the package and the long run incremental costs

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of nonbasic services contained in the package.

(c) Except as provided by Section 58.003, an electing company
may flexibly price a package that includes a basic network service in
any manner provided by Section 51.002(7).

Added by Acts 1999, 76th Leg., ch. 1212, Sec. 42, eff. Sept. 1, 1999.

SUBCHAPTER E. NONBASIC SERVICES

Sec. 58.151. SERVICES INCLUDED. The following services are
classified as nonbasic services:
(1) flat rate business local exchange telephone service,
including primary directory listings and the receipt of a directory,
and any applicable mileage or zone charges, except that the prices
for this service shall be capped until September 1, 2005, at the
prices in effect on September 1, 1999;
(2) business tone dialing service, except that the prices
for this service shall be capped until September 1, 2005, at the
prices in effect on September 1, 1999;
(3) service connection for all business services, except
that the prices for this service shall be capped until September 1,
2005, at the prices in effect on September 1, 1999;
(4) direct inward dialing for basic business services,
except that the prices for this service shall be capped until
September 1, 2005, at the prices in effect on September 1, 1999;
(5) "1-plus" intraLATA message toll services;
(6) 0+ and 0- operator services;
(7) call waiting, call forwarding, and custom calling,
except that:
(A) residential call waiting service shall be
classified as a basic network service until July 1, 2006; and
(B) for an electing company subject to Section 58.301,
prices for residential call forwarding and other custom calling
services shall be capped at the prices in effect on September 1,
1999, until the electing company implements the reduction in switched
access rates described by Section 58.301(2);
(8) call return, caller identification, and call control
options, except that, for an electing company subject to Section
58.301, prices for residential call return, caller identification,
and call control options shall be capped at the prices in effect on

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September 1, 1999, until the electing company implements the

reduction in switched access rates described by Section 58.301(2);
(9) central office based PBX-type services;
(10) billing and collection services, including installment
billing and late payment charges for customers of the electing
company;
(11) integrated services digital network (ISDN) services,
except that prices for Basic Rate Interface (BRI) ISDN services,
which comprise up to two 64 Kbps B-channels and one 16 Kbps D-
channel, shall be capped until September 1, 2005, at the prices in
effect on September 1, 1999;
(12) new services;
(13) directory assistance services, except that an electing
company shall provide to a residential customer the first three
directory assistance inquiries in a monthly billing cycle at no
charge until July 1, 2006;
(14) services described in the WATS tariff as the tariff
existed on January 1, 1995;
(15) 800 and foreign exchange services;
(16) private line service;
(17) special access service;
(18) services from public pay telephones;
(19) paging services and mobile services (IMTS);
(20) 911 services provided to a local authority that are
available from another provider;
(21) speed dialing;
(22) three-way calling; and
(23) all other services subject to the commission's
jurisdiction that are not specifically classified as basic network
services in Section 58.051, except that nothing in this section shall
preclude a customer from subscribing to a local flat rate residential
or business line for a computer modem or a facsimile machine.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 1212, Sec. 43, eff. Sept. 1, 1999.
Amended by:
Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 19, eff.
September 7, 2005.

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Sec. 58.152. PRICES. (a) An electing company may set the

price for any nonbasic service at any level above the lesser of the:
(1) service's long run incremental cost in accordance with
the imputation rules prescribed by or under Subchapter D, Chapter 60;
or
(2) price for the service in effect on September 1, 1999.
(b) Subject to Section 51.004, an electing company may use
pricing flexibility for a nonbasic service. Pricing flexibility
includes all pricing arrangements included in the definition of
"pricing flexibility" prescribed by Section 51.002 and includes
packages that include basic network services.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 1212, Sec. 43, eff. Sept. 1, 1999.

Sec. 58.153. NEW SERVICES. (a) Subject to the pricing

conditions prescribed by Section 58.152(a), an electing company may
introduce a new service 10 days after providing an informational
notice to the commission, to the office, and to any person who holds
a certificate of operating authority in the electing company's
certificated area or areas or who has an effective interconnection
agreement with the electing company.
(b) An electing company serving more than five million access
lines in this state shall provide notice to any person who holds a
certificate of operating authority in the electing company's
certificated area or areas or who has an effective interconnection
agreement with the electing company of any changes in the generally
available prices and terms under which the electing company offers
basic or nonbasic telecommunications services regulated by the
commission at retail rates to subscribers that are not
telecommunications providers. Changes requiring notice under this
subsection include the introduction of any new nonbasic services, any
new features or functions of basic or nonbasic services, promotional
offerings of basic or nonbasic services, or the discontinuation of
then-current features or services. The electing company shall
provide the notice:
(1) if the electing company is required to give notice to
the commission, at the same time the company provides that notice;
or

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(2) if the electing company is not required to give notice

to the commission, at least 45 days before the effective date of a
price change or 90 days before the effective date of a change other
than a price change, unless the commission determines that the notice
should not be given.
(c) An affected person, the office on behalf of residential or
small commercial customers, or the commission may file a complaint at
the commission challenging whether the pricing by an incumbent local
exchange company of a new service is in compliance with Section
58.152(a). The commission shall allow the company to continue to
provide the service while the complaint is pending.
(d) If a complaint is filed under Subsection (c), the electing
company has the burden of proving that the company set the price for
the new service in accordance with Section 58.152(a). If the
complaint is finally resolved in favor of the complainant, the
company:
(1) shall, not later than the 10th day after the date the
complaint is finally resolved, amend the price of the service as
necessary to comply with the final resolution; or
(2) may, at the company's option, discontinue the service.
(e) The notice requirement prescribed by Subsection (b) expires
September 1, 2003.

Added by Acts 1999, 76th Leg., ch. 1212, Sec. 43, eff. Sept. 1, 1999.

Sec. 58.155. INTERCONNECTION. Because interconnection to

competitive providers and interconnection for commercial mobile
service providers are subject to the requirements of Sections 251 and
252, Communications Act of 1934 (47 U.S.C. Sections 251 and 252), as
amended, and Federal Communications Commission rules, including the
commission's authority to arbitrate issues, interconnection is not
addressed in this subchapter or Subchapter B.

Added by Acts 1999, 76th Leg., ch. 1212, Sec. 44, eff. Sept. 1, 1999.

Sec. 58.156. REGULATION OF SERVICES. Sections 55.001, 55.002,

55.003, and 55.004 do not apply to retail nonbasic services offered
by an electing company or by a transitioning company, as defined by
Section 65.002.

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Added by Acts 2013, 83rd Leg., R.S., Ch. 210 (S.B. 259), Sec. 3, eff.
September 1, 2013.

SUBCHAPTER F. GENERAL INFRASTRUCTURE COMMITMENT

Sec. 58.201. STATEMENT OF STATE GOAL. (a) It is the goal of
this state to facilitate and promote the deployment of an advanced
telecommunications infrastructure to spur economic development
throughout this state. This state should be among the leaders in
achieving this objective.
(b) The primary means of achieving this goal is through
encouraging private investment in this state's telecommunications
infrastructure by creating incentives for that investment and
promoting the development of competition.
(c) The best way to bring the benefits of an advanced
telecommunications network infrastructure to communities in this
state is through innovation and competition among all the state's
communications providers. Competition will provide residents of this
state with a choice of telecommunications providers and will drive
technology deployment, innovation, service quality, and cost-based
prices as competing firms try to satisfy customer needs.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 58.202. POLICY GOALS FOR IMPLEMENTATION. In implementing

this subchapter, the commission shall consider this state's policy
goals to:
(1) ensure the availability of the widest possible range of
competitive choices in the provision of telecommunications services
and facilities;
(2) foster competition and rely on market forces where
competition exists to determine the price, terms, and availability of
service;
(3) ensure the universal availability of basic local
telecommunications services at reasonable rates;
(4) encourage the continued development and deployment of
advanced and reliable capabilities and services in telecommunications
networks;
(5) ensure interconnection and interoperability, based on

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uniform technical standards, among telecommunications carriers;

(6) eliminate unnecessary administrative procedures that
impose regulatory barriers to competition and ensure that competitive
entry is fostered on an economically rational basis;
(7) ensure consumer protection and protection against
anticompetitive conduct;
(8) regulate a provider of services only to the extent the
provider has market power to control the price of services to
customers;
(9) encourage cost-based pricing of telecommunications
services so that consumers pay a fair price for services they use;
and
(10) subject to Subchapter C, develop appropriate quality
of service standards for local exchange companies so as to place this
state among the leaders in deployment of an advanced
telecommunications infrastructure.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 58.203. INFRASTRUCTURE GOALS OF ALL ELECTING COMPANIES.

(a) Recognizing that it will take time for competition to develop in
the local exchange market, the commission shall, in the absence of
competition, ensure that each electing company achieves the
infrastructure goals described by this section.
(b) Not later than December 31, 1996, an electing company shall
make available to each customer in the company's territory access to
end-to-end digital connectivity.
(c) Each new central office switch installed for an electing
company after September 1, 1995, must be digital or technically equal
to or superior to digital. In addition, a switch installed after
September 1, 1997, must, at a minimum, be capable of providing
integrated services digital network (ISDN) services in a manner
consistent with generally accepted national standards.
(d) Not later than January 1, 2000, 50 percent of the local
exchange access lines in each electing company's territory must be
served by a digital central office switch.
(e) Not later than January 1, 2000, an electing company's
public switched network backbone interoffice facilities must employ
broadband facilities capable of 45 or more megabits a second. The

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company may employ facilities at a lower bandwidth if technology

permits the delivery of video signal at the lower bandwidth at a
quality level comparable to a television broadcast signal. The
requirements of this subsection do not apply to local loop
facilities.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 58.204. ADDITIONAL INFRASTRUCTURE COMMITMENT OF CERTAIN

COMPANIES. (a) Not later than December 31, 1998, an electing
company serving more than one million but fewer than five million
access lines shall provide digital switching central offices in all
exchanges.
(b) Not later than January 1, 2000, an electing company serving
more than five million access lines shall:
(1) install Common Channel Signaling 7 capability in each
central office; and
(2) connect all of the company's serving central offices to
their respective LATA tandem central offices with optical fiber or
equivalent facilities.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 58.205. EXTENSION OR WAIVER OF INFRASTRUCTURE

REQUIREMENTS. (a) For an electing company that serves more than one
million but fewer than two million access lines, the commission may
temporarily extend a deadline prescribed by Section 58.203 if the
company demonstrates that the extension is in the public interest.
(b) For an electing company that serves fewer than one million
access lines, the commission may waive a requirement prescribed by
Section 58.203 if the company demonstrates that the investment is not
viable economically.
(c) Before granting a waiver under Subsection (b), the
commission must consider the public benefits that would result from
compliance with the requirement.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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Sec. 58.206. IMPLEMENTATION COSTS; INCREASE IN RATES AND

UNIVERSAL SERVICE FUNDS. The commission may not consider the cost of
implementing Section 58.203 or 58.204 in determining whether an
electing company is entitled to:
(1) a rate increase under this chapter; or
(2) increased universal service funds under Subchapter B,
Chapter 56.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER G. INFRASTRUCTURE COMMITMENT TO CERTAIN ENTITIES

Sec. 58.251. INTENT AND GOAL OF SUBCHAPTER. (a) It is the
intent of this subchapter to establish a telecommunications
infrastructure that interconnects the public entities described in
this subchapter. The interconnection of these entities requires
ubiquitous, broadband, digital services for voice, video, and data in
the local serving area. The ubiquitous nature of these connections
must allow individual networks of these entities to interconnect and
interoperate across the broadband digital service infrastructure.
The delivery of these advanced telecommunications services requires
collaborations and partnerships of public, private, and commercial
telecommunications service network providers.
(b) The goal of this subchapter is to interconnect and
aggregate the connections to every entity described in this
subchapter, in the local serving area. It is further intended that
the infrastructure implemented under this subchapter connect each
entity that requests a service offered under this subchapter.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 58.252. DEFINITIONS. In this subchapter:

(1) "Educational institution" has the meaning assigned by
Section 57.021.
(1-a) "Health center" means a federally qualified health
center service delivery site.
(2) "Library" means:
(A) a public library or regional library system as
those terms are defined by Section 441.122, Government Code;
(B) a library operated by an institution of higher

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education or a school district; or

(C) a library operated by a nonprofit corporation as
defined by Section 441.221(3), Government Code.
(3) "Private network services" means:
(A) broadband digital service that is capable of
providing transmission speeds of 45 megabits a second or greater for
customer applications; and
(B) other customized or packaged network services.
(4) "Telemedicine center" means a facility that is equipped
to transmit, by video, data, or voice service, medical information
for the diagnosis or treatment of illness or disease and that is:
(A) owned or operated by a public or not-for-profit
hospital, including an academic health center; or
(B) owned by one or more state-licensed health care
practitioners and operated on a nonprofit basis.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2007, 80th Leg., R.S., Ch. 831 (H.B. 735), Sec. 11, eff.
September 1, 2008.
Acts 2011, 82nd Leg., R.S., Ch. 903 (S.B. 773), Sec. 1, eff.
September 1, 2011.

Sec. 58.253. PRIVATE NETWORK SERVICES FOR CERTAIN ENTITIES.

(a) On customer request, an electing company shall provide private
network services to:
(1) an educational institution;
(2) a library as defined in Section 57.021;
(3) a nonprofit telemedicine center;
(4) a public or not-for-profit hospital;
(5) a legally constituted consortium or group of entities
listed in this subsection; or
(6) a health center.
(b) Except as provided by Section 58.266, the electing company
shall provide the private network services for the private and sole
use of the receiving entity.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 2001, 77th Leg., ch. 959, Sec. 9, eff. June 14, 2001; Acts
2001, 77th Leg., ch. 1220, Sec. 4, eff. Sept. 1, 2001; Acts 2001,

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 UTILITIES CODE

77th Leg., ch. 1255, Sec. 16, eff. June 15, 2001; Acts 2001, 77th
Leg., ch. 1350, Sec. 7, eff. Sept. 1, 2001.
Amended by:
Acts 2007, 80th Leg., R.S., Ch. 831 (H.B. 735), Sec. 12, eff.
September 1, 2008.
Acts 2011, 82nd Leg., R.S., Ch. 903 (S.B. 773), Sec. 2, eff.
September 1, 2011.

Sec. 58.254. PRIORITIES. An electing company shall give

priority to serving:
(1) rural areas;
(2) areas designated as critically underserved either
medically or educationally; and
(3) educational institutions with high percentages of
economically disadvantaged students.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 58.255. CONTRACTS FOR PRIVATE NETWORK SERVICES. (a) An

electing company shall provide a private network service under a
customer specific contract.
(b) An electing company shall offer private network service
contracts under this subchapter at 110 percent of the long run
incremental cost of providing the private network service, including
installation.
(c) Commission approval of a contract is not required.
(d) Subtitle D, Title 10, Government Code, does not apply to a
contract entered into under this subchapter.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2011, 82nd Leg., R.S., Ch. 21 (S.B. 983), Sec. 2, eff.
September 1, 2011.
Acts 2011, 82nd Leg., R.S., Ch. 98 (S.B. 980), Sec. 12, eff.
September 1, 2011.
Acts 2011, 82nd Leg., R.S., Ch. 903 (S.B. 773), Sec. 3, eff.
September 1, 2011.

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Sec. 58.256. PREFERRED RATE TREATMENT WARRANTED. An entity

described by Section 58.253(a) warrants preferred rate treatment.
However, a rate charged for a service must cover the service's long
run incremental cost.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 58.257. ELECTION OF RATE TREATMENT. An educational

institution or a library may elect the rate treatment provided by
this subchapter or the discount provided by Subchapter B, Chapter 57.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 58.258. PRIVATE NETWORK SERVICES RATES AND TARIFFS. (a)

Notwithstanding the pricing flexibility authorized by this subtitle,
an electing company's rates for private network services may not be
increased before January 1, 2016. However, an electing company may
increase a rate in accordance with the provisions of a customer
specific contract.
(b) An electing company may not charge an entity described by
Section 58.253(a) a special construction or installation charge.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 20, eff.
September 7, 2005.
Acts 2011, 82nd Leg., R.S., Ch. 903 (S.B. 773), Sec. 4, eff.
September 1, 2011.

Sec. 58.259. TARIFF RATE FOR CERTAIN INTRALATA SERVICE. (a)

An electing company shall file a flat monthly tariff rate for point-
to-point intraLATA 1.544 megabits a second service for the entities
described by Section 58.253(a).
(b) The tariff rate may not be:
(1) distance sensitive; or
(2) higher than 110 percent of the service's statewide
average long run incremental cost, including installation.

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Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2011, 82nd Leg., R.S., Ch. 903 (S.B. 773), Sec. 5, eff.
September 1, 2011.

Sec. 58.260. POINT-TO-POINT 45 MEGABITS A SECOND INTRALATA

SERVICE. (a) On request of an entity described by Section
58.253(a), an electing company shall provide to the entity point-to-
point 45 megabits a second intraLATA services.
(b) The service must be provided under a customer specific
contract except that any interoffice portion of the service must be
recovered on a statewide average basis that is not distance
sensitive.
(c) The rate for the service may not be higher than 110 percent
of the service's long run incremental cost, including installation.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2011, 82nd Leg., R.S., Ch. 903 (S.B. 773), Sec. 6, eff.
September 1, 2011.

Sec. 58.261. BROADBAND DIGITAL SPECIAL ACCESS SERVICE. (a) An

electing company shall provide to an entity described by Section
58.253(a) broadband digital special access service to interexchange
carriers.
(b) The rate for the service may not be higher than 110 percent
of the service's long run incremental cost, including installation.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2011, 82nd Leg., R.S., Ch. 903 (S.B. 773), Sec. 7, eff.
September 1, 2011.

Sec. 58.262. EXPANDED INTERCONNECTION. (a) On request of an

entity described by Section 58.253(a), an electing company shall
provide to the entity expanded interconnection (virtual colocation).
(b) The company shall provide expanded interconnection:
(1) in accordance with commission rules adopted under

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 UTILITIES CODE

Subchapter H, Chapter 60; and

(2) at 105 percent of long run incremental cost, including
installation.
(c) An entity described by Section 58.253(a) is not required to
qualify for expanded interconnection if expanded interconnection is
ordered by the commission.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 58.263. INTERNET ACCESS. (a) This section applies only

to an educational institution or library in an exchange of an
electing company serving more than five million access lines in which
toll-free access to the Internet is not available.
(b) On request of the educational institution or library, the
electing company shall make available a toll-free connection or toll-
free dialing arrangement that the institution or library may use to
obtain access to the Internet in an exchange in which toll-free
access to the Internet is available.
(c) The electing company shall provide the connection or
dialing arrangement at no charge to the educational institution or
library until Internet access becomes available in the exchange of
the requesting educational institution or library.
(d) The electing company is not required to arrange for
Internet access or to pay Internet charges for the requesting
educational institution or library.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 58.264. COMPLAINTS LIMITED. (a) Notwithstanding any

other provision of this title, an electing company is subject to a
complaint under this subchapter only by an entity described by
Section 58.253(a).
(b) An entity may only complain that the company provided a
private network service under this subchapter preferentially to a
similarly situated customer.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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Sec. 58.265. INTERCONNECTION OF NETWORK SERVICES. The private

network services provided under this subchapter may be interconnected
with other similar networks for distance learning, telemedicine, and
information-sharing purposes.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 58.266. SHARING OR RESALE OF NETWORK SERVICES. (a) A

private network service may be used by and shared among the entities
described by Section 58.253(a) but may not be otherwise shared or
resold to other customers.
(b) A service provided under this subchapter may not be
required to be resold to another customer at a rate provided by this
subchapter.
(c) This section does not prohibit an otherwise permitted
resale of another service that an electing company may offer through
the use of the same facilities used to provide a private network
service offered under this subchapter.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 58.267. IMPLEMENTATION COSTS; INCREASE IN RATES AND

UNIVERSAL SERVICE FUNDS. The commission may not consider the cost of
implementing this subchapter in determining whether an electing
company is entitled to:
(1) a rate increase under this chapter; or
(2) increased universal service funds under Subchapter B,
Chapter 56.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 58.268. CONTINUATION OF OBLIGATION. Notwithstanding any

other provision of this title, an electing company shall continue to
comply with this subchapter until January 1, 2016, regardless of:
(1) the date the company elected under this chapter; or
(2) any action taken in relation to that company under
Chapter 65.

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Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 21, eff.
September 7, 2005.
Amended by:
Acts 2011, 82nd Leg., R.S., Ch. 903 (S.B. 773), Sec. 8, eff.
September 1, 2011.

SUBCHAPTER H. SWITCHED ACCESS SERVICES

Sec. 58.301. SWITCHED ACCESS RATE REDUCTION. An electing
company with greater than five million access lines in this state
shall reduce its switched access rates on a combined originating and
terminating basis as follows:
(1) the electing company shall reduce switched access rates
on a combined originating and terminating basis in effect on
September 1, 1999, by one cent a minute; and
(2) the electing company shall reduce switched access rates
on a combined originating and terminating basis by an additional two
cents a minute on the earlier of:
(A) July 1, 2000; or
(B) the date the electing company, or its affiliate
formed in compliance with 47 U.S.C. Section 272, as amended, actually
begins providing interLATA services in this state in accordance with
the authorization required by 47 U.S.C. Section 271, as amended.

Added by Acts 1999, 76th Leg., ch. 1212, Sec. 45, eff. Sept. 1, 1999.

Sec. 58.302. SWITCHED ACCESS RATE CAP. (a) An electing

company may not increase the per minute rates for switched access
services on a combined originating and terminating basis above the
lesser of:
(1) the rates for switched access services charged by that
electing company on September 1, 1999, as may be further reduced on
implementation of the universal service fund under Chapter 56; or
(2) the applicable rate described by Section 58.301 as may
be further reduced on implementation of the universal service fund
under Chapter 56.
(b) Notwithstanding Subchapter F, Chapter 60, but subject to
Section 60.001, an electing company may, on its own initiative,
decrease a rate charged for switched access service to any amount

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 UTILITIES CODE

above the long run incremental cost of the service.

Added by Acts 1999, 76th Leg., ch. 1212, Sec. 45, eff. Sept. 1, 1999.

CHAPTER 59. INFRASTRUCTURE PLAN

SUBCHAPTER A. GENERAL PROVISIONS
Sec. 59.001. POLICY. It is the policy of this state that an
incumbent local exchange company that does not elect to be regulated
under Chapter 58 should have incentives to deploy infrastructure that
will benefit the residents of this state while maintaining reasonable
local rates and universal service.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 59.002. DEFINITIONS. In this chapter:

(1) "Electing company" means an incumbent local exchange
company that elects for an infrastructure commitment and
corresponding regulation under this chapter.
(2) "Election date" means the date on which the commission
receives notice of election under Subchapter B.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER B. INFRASTRUCTURE INCENTIVES

Sec. 59.021. ELECTION. (a) An incumbent local exchange
company may elect to make an infrastructure commitment and to be
subject to corresponding regulation under this chapter if the
company:
(1) serves less than five percent of the access lines in
this state; and
(2) has not elected incentive regulation under Chapter 58.
(b) A company makes the election by notifying the commission in
writing of the company's election.
(c) A company electing under this chapter may renew the
election for successive two-year periods. An election that is
renewed under this subsection remains in effect until the earlier of
the date that:
(1) the election expires because it was not renewed;

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 UTILITIES CODE

(2) the commission allows the company to withdraw its

election under Section 59.022; or
(3) the legislature eliminates the incentive regulation
authorized by this chapter and Chapter 58.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 1212, Sec. 46, eff. Sept. 1, 1999.

Sec. 59.022. WITHDRAWAL OF ELECTION. (a) The commission may

allow an electing company to withdraw the company's election under
this chapter:
(1) on application by the company; and
(2) only for good cause.
(b) In this section, "good cause" includes only matters beyond
the control of the company.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 59.023. ELECTION UNDER CHAPTER 58. (a) This chapter does
not prohibit a company electing under this chapter from electing
incentive regulation under Chapter 58.
(b) If a company makes an election under Chapter 58, the
infrastructure commitment made under this chapter offsets the
infrastructure commitment required in connection with the Chapter 58
election.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 59.024. RATE CHANGES. (a) Except for the charges

permitted under Subchapter C, Chapter 55, Subchapter B, Chapter 56,
and Section 55.024, an electing company may not, before the end of
the company's election period under this chapter, increase a rate
previously established for that company under this title unless the
commission approves the proposed change as authorized under
Subsection (c) or (d).
(b) For purposes of Subsection (a), the company's previously
established rates are the rates charged by the company on its
election date without regard to a proceeding pending under:

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 UTILITIES CODE

(1) Section 15.001;

(2) Subchapter D, Chapter 53; or
(3) Subchapter G, Chapter 2001, Government Code.
(c) The commission, on motion of the electing company or on its
own motion, shall adjust prices for services to reflect changes in
Federal Communications Commission separations that affect intrastate
net income by at least 10 percent.
(d) Notwithstanding Subsection (a), the commission, on request
of the electing company, shall allow a rate group reclassification
that results from access line growth.
(e) Section 58.059 applies to a rate change under this section.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 1212, Sec. 47, eff. Sept. 1, 1999.

Sec. 59.025. SWITCHED ACCESS RATES. Notwithstanding any other

provision of this title, the commission may not, on the commission's
own motion, reduce an electing company's rates for switched access
services before the expiration of the election period prescribed by
Section 59.024, but may approve a reduction proposed by the electing
company.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 1212, Sec. 48, eff. Sept. 1, 1999.

Sec. 59.026. COMPLAINT OR HEARING. (a) On or before the end

of the company's election period, an electing company is not, under
any circumstances, subject to:
(1) a complaint or hearing regarding the reasonableness of
the company's:
(A) rates;
(B) overall revenues;
(C) return on invested capital; or
(D) net income; or
(2) a complaint that a rate is excessive.
(b) Subsection (a) applies only to a company that is in
compliance with the company's infrastructure commitment under this
chapter.
(c) This section does not prohibit a complaint, hearing, or

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determination on an electing company's implementation of a

competitive safeguard required by Chapter 60.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 1212, Sec. 49, eff. Sept. 1, 1999.

Sec. 59.027. CONSUMER COMPLAINTS REGARDING TARIFFS. (a) This

chapter does not restrict:
(1) a consumer's right to complain to the commission about
the application of an ambiguous tariff; or
(2) the commission's right to determine:
(A) the proper application of that tariff; or
(B) the proper tariff rate if that tariff does not
apply.
(b) This section does not permit the commission to:
(1) lower a tariff rate except as specifically provided by
this title;
(2) change the commission's interpretation of a tariff; or
(3) extend the application of a tariff to a new class of
customers.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 59.028. CONSUMER COMPLAINTS REGARDING SERVICES;

ENFORCEMENT OF STANDARDS. This chapter does not restrict:
(1) a consumer's right to complain to the commission about
quality of service; or
(2) the commission's right to enforce a quality of service
standard.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 59.029. INVESTMENT LIMITATION ON SERVICE STANDARDS. (a)

The commission may not raise a service standard applicable to the
provision of local exchange telephone service by an electing company
if the increased investment required to comply with the raised
standard in any year exceeds 10 percent of the company's average
annual intrastate additions in capital investment for the most recent

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five-year period.
(b) In computing the average under Subsection (a), the electing
company shall exclude:
(1) extraordinary investments made during the five-year
period; and
(2) investments required by Section 59.052.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 59.030. NEW SERVICES. (a) An electing company may

introduce a new service 10 days after providing an informational
notice to the commission, to the office, and to any person who holds
a certificate of operating authority in the electing company's
certificated area or areas or who has an effective interconnection
agreement with the electing company.
(b) An electing company shall price each new service at or
above the service's long run incremental cost. The commission shall
allow a company serving fewer than one million access lines to
establish a service's long run incremental cost by adopting, at that
company's option, the cost studies of a larger company for that
service that has been accepted by the commission.
(c) An affected person, the office on behalf of residential or
small commercial customers, or the commission may file a complaint at
the commission challenging whether the pricing by an electing company
of a new service is in compliance with Subsection (b).
(d) If a complaint is filed under Subsection (c), the electing
company has the burden of proving that the company set the price for
the new service in accordance with the applicable provisions of this
subchapter. If the complaint is finally resolved in favor of the
complainant, the electing company:
(1) shall, not later than the 10th day after the date the
complaint is finally resolved, amend the price of the service as
necessary to comply with the final resolution; or
(2) may, at the company's option, discontinue the service.

Added by Acts 1999, 76th Leg., ch. 1212, Sec. 50, eff. Sept. 1, 1999.

Sec. 59.031. PRICING AND PACKAGING FLEXIBILITY. (a)

Notwithstanding Section 59.027(b) or Subchapter F, Chapter 60, an

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electing company may exercise pricing flexibility in accordance with

this section, including the packaging of any regulated service such
as basic local telecommunications service with any other regulated or
unregulated service or any service of an affiliate. The electing
company may exercise pricing flexibility 10 days after providing an
informational notice to the commission, to the office, and to any
person who holds a certificate of operating authority in the electing
company's certificated area or areas or who has an effective
interconnection agreement with the electing company. Pricing
flexibility includes all pricing arrangements included in the
definition of "pricing flexibility" prescribed by Section 51.002(7)
and includes packaging of regulated services with unregulated
services or any service of an affiliate.
(b) An electing company, at the company's option, shall price
each regulated service offered separately or as part of a package
under Subsection (a) at either the service's tariffed rate or at a
rate not lower than the service's long run incremental cost. The
commission shall allow a company serving fewer than one million
access lines to establish a service's long run incremental cost by
adopting, at that company's option, the cost studies of a larger
company for that service that have been accepted by the commission.
(c) An affected person, the office on behalf of residential or
small commercial customers, or the commission may file a complaint
alleging that an electing company has priced a regulated service in a
manner that does not meet the pricing standards of this subchapter.
The complaint must be filed before the 31st day after the company
implements the rate.

Added by Acts 1999, 76th Leg., ch. 1212, Sec. 50, eff. Sept. 1, 1999.

Sec. 59.032. CUSTOMER PROMOTIONAL OFFERINGS. (a) An electing

company may offer a promotion for a regulated service for not more
than 90 days in any 12-month period.
(b) The electing company shall file with the commission a
promotional offering that consists of:
(1) waiver of installation charges or service order
charges, or both, for not more than 90 days in a 12-month period; or
(2) a temporary discount of not more than 25 percent from
the tariffed rate for not more than 60 days in a 12-month period.

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(c) An electing company is not required to obtain commission

approval to make a promotional offering described by Subsection (b).
(d) An electing company may offer a promotion of any regulated
service as part of a package of services consisting of any regulated
service with any other regulated or unregulated service or any
service of an affiliate.

Added by Acts 1999, 76th Leg., ch. 1212, Sec. 50, eff. Sept. 1, 1999.

SUBCHAPTER C. INFRASTRUCTURE COMMITMENT AND GOALS

Sec. 59.051. INFRASTRUCTURE COMMITMENT. (a) An electing
company shall commit to make in this state, during the six years
after the election date, the telecommunications infrastructure
investment prescribed by this chapter.
(b) The company shall make the commitment to the governor and
the commission in writing.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 59.052. INFRASTRUCTURE GOALS. (a) The commission shall

ensure that each electing company achieves the infrastructure goals
described by this section.
(b) Each new central office switch installed for an electing
company in this state after September 1, 1995, must be digital.
(c) An electing company shall make available to each customer
in the company's territory access to end-to-end digital connectivity.
In this subsection, "make available" has the meaning assigned by 16
T.A.C. Section 23.69.
(d) In each electing company's territory, 50 percent of the
local exchange access lines must be served by a digital central
office switch.
(e) An electing company's public switched network backbone
interoffice facilities must employ broadband facilities that serve at
least 50 percent of the local exchange access lines and are capable
of 45 or more megabits a second. The company may employ facilities
at a lower bandwidth if technology permits the delivery of video
signal at the lower bandwidth at a quality level comparable to a
television broadcast signal. The requirements of this subsection do
not apply to local loop facilities.

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(f) An electing company shall install Common Channel Signaling

7 capability in each access tandem office.
(g) The infrastructure goals specified by Subsections (c)-(f)
must be achieved not later than January 1, 2000.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 59.053. WAIVER OF INFRASTRUCTURE REQUIREMENTS. (a) For

an electing company that serves fewer than one million lines, the
commission may waive a requirement prescribed by Section 59.052 if
the company demonstrates that the investment is not viable
economically.
(b) Before granting a waiver under Subsection (a), the
commission must consider the public benefits that would result from
compliance with the requirement.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 59.054. PROGRESS REPORT. (a) On each anniversary of the

company's election date, an electing company shall file with the
commission a report on the company's progress on its infrastructure
commitment.
(b) The report must include a statement of:
(1) the institutions requesting service under Subchapter D;
(2) the institutions served under Subchapter D;
(3) the investments and expenses for the previous period
and the total investments and expenses for all periods; and
(4) other information the commission considers necessary.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 59.055. IMPLEMENTATION COSTS; INCREASE IN RATES AND

UNIVERSAL SERVICE FUNDS. The commission may not consider the cost of
implementing Section 59.052 in determining whether an electing
company is entitled to:
(1) a rate increase under this chapter; or
(2) increased universal service funds under Subchapter B,
Chapter 56.

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Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER D. INFRASTRUCTURE COMMITMENT TO CERTAIN ENTITIES

Sec. 59.071. DEFINITIONS. In this subchapter:
(1) "Educational institution" has the meaning assigned by
Section 57.021.
(2) "Library" means:
(A) a public library or regional library system as
those terms are defined by Section 441.122, Government Code;
(B) a library operated by an institution of higher
education or a school district; or
(C) a library operated by a nonprofit corporation as
defined by Section 441.221(3), Government Code.
(3) "Private network services" means telecommunications
services provided to an entity described by Section 59.072(a),
including broadband services, customized services, and packaged
network services.
(4) "Telemedicine center" means a facility that is equipped
to transmit, by video or data service, medical information for the
diagnosis or treatment of illness or disease and that is:
(A) owned or operated by a public or not-for-profit
hospital; or
(B) owned by a state-licensed health care practitioner
and operated on a nonprofit basis.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2007, 80th Leg., R.S., Ch. 831 (H.B. 735), Sec. 13, eff.
September 1, 2008.

Sec. 59.072. PRIVATE NETWORK SERVICES FOR CERTAIN ENTITIES.

(a) On customer request, an electing company shall provide private
network services to:
(1) an educational institution;
(2) a library;
(3) a telemedicine center; or
(4) a legally constituted consortium or group of entities
listed in this subsection.

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(b) Except as provided by Section 59.081, the electing company

shall provide the private network services for the private and sole
use of the receiving entity. However, the company may provide the
services with a facility that is used to provide another service to
another customer.
(c) The customers listed in Subsection (a) are a special class
of customers for purposes of the private network for distance
learning, telemedicine, and information-sharing purposes.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 59.073. INVESTMENT PRIORITIES. An electing company shall

give investment priority to serving:
(1) rural areas;
(2) areas designated as critically underserved medically or
educationally; and
(3) educational institutions with high percentages of
economically disadvantaged students.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 59.074. CONTRACTS FOR PRIVATE NETWORK SERVICES. (a) An

electing company shall provide a private network service under a
customer-specific contract.
(b) An electing company shall offer private network service
contracts under this subchapter at 110 percent of the long run
incremental cost of providing the private network service, including
installation costs.
(c) Commission approval of a contract is not required.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2011, 82nd Leg., R.S., Ch. 21 (S.B. 983), Sec. 3, eff.
September 1, 2011.
Acts 2011, 82nd Leg., R.S., Ch. 98 (S.B. 980), Sec. 13, eff.
September 1, 2011.

Sec. 59.075. PREFERRED RATE TREATMENT WARRANTED. The classes

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of customers described by Section 59.072(a) warrant preferred rate

treatment. However, a rate charged for a service must cover the
service's long run incremental cost.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 59.076. ELECTION OF RATE TREATMENT. An educational

institution or a library may elect the rate treatment provided by
this subchapter or the discount provided by Subchapter B, Chapter 57.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 59.077. PRIVATE NETWORK SERVICES RATES AND TARIFFS. (a)

Notwithstanding the pricing flexibility authorized by this subtitle,
an electing company's rates for private network services may not be
increased before January 1, 2016.
(b) An electing company may not assess an entity described by
Section 59.072(a) a tariffed special construction or installation
charge unless the company and the entity agree on the assessment.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 22, eff.
September 7, 2005.
Acts 2011, 82nd Leg., R.S., Ch. 903 (S.B. 773), Sec. 9, eff.
September 1, 2011.

Sec. 59.078. PRIVATE LINE OR SPECIAL ACCESS RATES. (a) On

request by an educational institution or a library, an electing
company shall provide 1.544 megabits a second private line or special
access service at 110 percent of the service's long run incremental
cost, including installation costs.
(b) The rate provided by Subsection (a) is in lieu of the
discount provided by Subchapter B, Chapter 57.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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Sec. 59.079. COMPLAINTS LIMITED. Notwithstanding any other

provision of this title, an electing company is subject to a
complaint under Subchapter C or this subchapter only by an entity
described by Section 59.072(a).

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 59.080. INTERCONNECTION OF NETWORK SERVICES. The private

network services provided under this subchapter may be interconnected
with other similar networks for distance learning, telemedicine, and
information-sharing purposes.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 59.081. SHARING OR RESALE OF NETWORK SERVICES. (a) A

private network service may be used and shared among the entities
described by Section 59.072(a) but may not be otherwise shared or
resold to other customers.
(b) A service provided under this subchapter may not be
required to be resold to other customers at a rate provided by this
subchapter.
(c) This section does not prohibit an otherwise permitted
resale of another service that an electing company may offer through
the use of the same facilities used to provide a private network
service offered under this subchapter.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 59.082. IMPLEMENTATION COSTS; INCREASE IN RATES AND

UNIVERSAL SERVICE FUNDS. The commission may not consider the cost of
implementing this subchapter in determining whether an electing
company is entitled to:
(1) a rate increase under this chapter; or
(2) increased universal service funds under Subchapter B,
Chapter 56.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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Sec. 59.083. CONTINUATION OF OBLIGATION. Notwithstanding any

other provision of this title, an electing company shall continue to
comply with this subchapter until January 1, 2016, regardless of:
(1) the date the company elected under this chapter; or
(2) any action taken in relation to that company under
Chapter 65.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 23, eff.
September 7, 2005.
Amended by:
Acts 2011, 82nd Leg., R.S., Ch. 903 (S.B. 773), Sec. 10, eff.
September 1, 2011.

CHAPTER 60. COMPETITIVE SAFEGUARDS

SUBCHAPTER A. GENERAL PROVISIONS
Sec. 60.001. FAIR COMPETITION. To the extent necessary to
ensure that competition in telecommunications is fair to each
participant and to accelerate the improvement of telecommunications
in this state, the commission shall ensure that the rates and rules
of an incumbent local exchange company:
(1) are not unreasonably preferential, prejudicial, or
discriminatory; and
(2) are applied equitably and consistently.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 60.002. EXCLUSIVE JURISDICTION; ENFORCEMENT. (a) The

commission has exclusive jurisdiction to implement competitive
safeguards.
(b) Section 58.025 does not prevent the commission from
enforcing this chapter.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 60.003. COMMISSION AUTHORITY. (a) The commission may:

(1) establish procedures with respect to a policy stated in
this subchapter or Subchapters B-H; and
(2) resolve a dispute that arises under a policy described

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by Subdivision (1).
(b) The commission shall adopt procedures for a proceeding
under Subchapters B and C. A procedure may:
(1) limit discovery; and
(2) for purposes of cross-examination align any party,
other than the office, with another party that has a similar
position.
(c) In adopting a procedure under this section and in resolving
a dispute, the commission shall consider the action's effect on:
(1) consumers;
(2) competitors; and
(3) the incumbent local exchange company.
(d) The commission, by order or rule, may not implement a
requirement that is contrary to a federal law or rule.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 60.004. APPLICABILITY TO CERTAIN SMALLER INCUMBENT LOCAL

EXCHANGE COMPANIES; RULES. (a) Subchapters B, C, and H may be
applied to an incumbent local exchange company that serves fewer than
31,000 access lines only on a bona fide request from a certificated
telecommunications utility.
(b) In applying the rules adopted under Subchapters B, C, and H
to a company described by Subsection (a), the commission may modify
the rules in the public interest.
(c) This section takes effect September 1, 1998.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 60.005. APPLICABILITY TO CERTAIN LARGER INCUMBENT LOCAL

EXCHANGE COMPANIES; RULES. (a) Subchapters B, D, and F may be
applied to an incumbent local exchange company that, as of September
1, 1995, has 31,000 or more access lines in this state but fewer than
one million access lines in this state only on a bona fide request
from a holder of a certificate of operating authority or a service
provider certificate of operating authority.
(b) In applying the rules adopted under Subchapters B, D, and F
to a company described by Subsection (a), the commission may modify
the rules in the public interest.

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Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 60.006. BULLETIN BOARD SYSTEMS UNAFFECTED. This subtitle

does not:
(1) require the commission to change the rate treatment
established by the commission in Docket No. 8387 for a bulletin board
system in a residence;
(2) regulate or tax a bulletin board system or Internet
service provider that provides only enhanced or information services
and that does not provide a telecommunications service; or
(3) require a change in a rate charged to an entity
described by Subdivision (2) under a tariff in effect on September 1,
1995.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER B. UNBUNDLING
Sec. 60.021. MINIMUM UNBUNDLING REQUIREMENT. At a minimum, an
incumbent local exchange company shall unbundle its network to the
extent the Federal Communications Commission orders.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 60.022. COMMISSION UNBUNDLING ORDERS. (a) The commission

may adopt an order relating to the issue of unbundling of local
exchange company services in addition to the unbundling required by
Section 60.021.
(b) Before ordering further unbundling, the commission must
consider the public interest and competitive merits of further
unbundling.
(c) On the request of a party, the commission shall proceed by
evidentiary hearing. If a request for a hearing is not made, the
commission may proceed by rulemaking.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 60.023. ASSIGNMENT OF UNBUNDLED COMPONENT TO CATEGORY OF

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SERVICE. The commission may assign an unbundled component to the

appropriate category of services under Chapter 58 according to the
purposes and intents of the categories.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER C. RESALE
Sec. 60.041. LOOP RESALE TARIFF. (a) An incumbent local
exchange company that on September 1, 1995, serves one million or
more access lines or that on or before September 1, 1995, elects
regulation under Chapter 58 shall file a usage sensitive loop resale
tariff.
(b) An incumbent local exchange company shall file a usage
sensitive loop resale tariff not later than the 60th day after the
date a certificate of operating authority or a service provider
certificate of operating authority is granted under Chapter 54 if the
company:
(1) serves fewer than one million access lines; and
(2) is not an electing company under Chapter 58.
(c) The commission shall conduct an appropriate proceeding to
determine the rates and terms of the resale tariff not later than the
180th day after the date the tariff is filed.
(d) The commission may not approve a usage sensitive rate
unless the rate recovers:
(1) the total long run incremental cost of the loop on an
unseparated basis; and
(2) an appropriate contribution to joint and common costs.
(e) Except as provided by Section 60.044, a person may not
purchase from the resale tariff unless the person is the holder of:
(1) a certificate of convenience and necessity;
(2) a certificate of operating authority; or
(3) a service provider certificate of operating authority.
(f) In this section, "loop resale" means the purchase of the
local distribution channel or loop facility from the incumbent local
exchange company to resell to end user customers.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 60.042. PROHIBITED RESALE OR SHARING. (a) A provider of

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telecommunications service may not impose a restriction on the resale

or sharing of a service:
(1) for which the provider is not a dominant provider; or
(2) entitled to regulatory treatment as a nonbasic service
under Subchapter E, Chapter 58, if the provider is a company electing
regulation under Chapter 58.
(b) An incumbent local exchange company must comply with the
resale provisions of 47 U.S.C. Section 251(c)(4), as amended, unless
exempted under 47 U.S.C. Section 251(f), as amended.
(c) If a company electing under Chapter 58 offers basic or
nonbasic services regulated by the commission to its retail customers
as a promotional offering, the electing company shall make those
services available for resale by a certificated telecommunications
utility on terms that are no less favorable than the terms on which
the services are made available to retail customers in accordance
with this section. For a promotion with a duration of 90 days or
less, the electing company's basic or nonbasic services shall be made
available to the certificated telecommunications utility at the
electing company's promotional rate, without an avoided-cost
discount. For a promotion with a duration of more than 90 days, the
electing company's basic or nonbasic services shall be made available
to the certificated telecommunications utility at a rate reflecting
the avoided-cost discount, if any, from the promotional rate.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 1212, Sec. 51, eff. Sept. 1, 1999.

Sec. 60.043. RESALE OBLIGATION. A holder of a certificate of

operating authority or a service provider certificate of operating
authority shall permit a local exchange company to resell the
holder's loop facilities at the holder's regularly published rates if
the local exchange company:
(1) does not have loop facilities; and
(2) has a request for service.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 60.044. ELIMINATION OF RESALE PROHIBITIONS. (a) Except

as provided by Subsections (c) and (d), the commission shall

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eliminate all resale prohibitions in the tariffs of an electing

company on the:
(1) completion of the commission's costing and pricing
rulemaking;
(2) completion of rate rebalancing of the incumbent local
exchange company rates under Subchapter F; and
(3) removal of all prohibitions on an incumbent local
exchange company's provision of interLATA services.
(b) Except as provided by Subsections (c) and (d), the
commission shall eliminate all resale prohibitions in the tariffs of
an electing company that has one million access lines or more on
removal of all prohibitions on the company's provision of interLATA
service.
(c) After the resale prohibitions are eliminated under this
section:
(1) the commission shall continue to prohibit the resale of
local exchange or directory assistance flat rate services as a
substitute for usage sensitive services; and
(2) residence service may not be resold to a business
customer.
(d) A service or function may be offered for resale only to the
same class of customer to which the incumbent local exchange company
sells the service if the commission finds that:
(1) as a result of the costing and pricing proceeding the
rate for the service or function will be less than the cost of
providing the service or function; and
(2) the difference in rate and cost will not be recovered
from the universal service fund.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 60.045. RESALE OR SHARING ARRANGEMENTS UNAFFECTED. This

subchapter does not change a resale or sharing arrangement permitted
in an incumbent local exchange company tariff that:
(1) existed on September 1, 1995; or
(2) was filed on or before May 1, 1995, by an incumbent
local exchange company that serves more than five million access
lines in this state.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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SUBCHAPTER D. IMPUTATION
Sec. 60.061. RULES. (a) The commission shall adopt rules
governing imputation of the price of a service.
(b) Imputation is a regulatory policy the commission shall
apply to prevent an incumbent local exchange company from selling a
service or function to another telecommunications utility at a price
that is higher than the rate the incumbent local exchange company
implicitly includes in services it provides to the company's retail
customers.
(c) The commission may require imputation only of the price of
a service that is:
(1) not generally available from a source other than the
incumbent local exchange company; and
(2) necessary for the competitor to provide a competing
service.
(d) The commission may require imputation only on a service-by-
service basis and may not require imputation on a rate-element-by-
element basis.
(e) For a service for which the commission may require
imputation under Subsection (c) and that is provided under a customer
specific contract, the commission:
(1) may require imputation only on a service-by-service
basis within the contract; and
(2) may not require imputation on a rate-element-by-element
basis.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 60.062. EXCEPTION FOR CAPPED PRICE. The commission may

not require imputation of the price to a local exchange telephone
service while the price is capped under Chapter 58 or 59.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 60.063. IMPUTATION FOR SWITCHED ACCESS. The commission

shall impute the price of switched access service to the price of
each service for which switched access service is a component until

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switched access service is competitively available.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 60.064. RECOVERY OF COST OF PROVIDING SERVICE. (a) An

incumbent local exchange company shall demonstrate that the price it
charges for retail service recovers the cost of providing the
service.
(b) For purposes of this section, the cost of providing the
service is the sum of:
(1) each specifically tariffed premium rate for each
noncompetitive service or service function, or each element of a
noncompetitive service or service function, or the functional
equivalent, that is used to provide the service;
(2) the total service long run incremental cost of the
competitive services or service functions that are used;
(3) each cost, not reflected in Subdivision (1) or (2),
that is specifically associated with providing the service or group
of services; and
(4) each cost or surcharge associated with an explicit
subsidy applied to all providers of the service to promote universal
service.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 60.065. WAIVERS. If the commission determines that a

waiver is in the public interest, the commission may waive an
imputation requirement for a public interest service such as:
(1) 9-1-1 service; or
(2) dual party relay service.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER E. TELECOMMUNICATIONS NUMBER PORTABILITY

Sec. 60.081. DEFINITION. In this subchapter,
"telecommunications number portability" means the ability of a
telecommunications services user who is changing from one
telecommunications service provider to another provider to retain a

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telephone number, to the extent technically feasible, without

impairing the quality, reliability, or convenience of service.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 60.082. PORTABILITY GUIDELINES. (a) Because a uniform

national number plan is valuable and necessary to this state, the
commission by rule shall adopt guidelines governing
telecommunications number portability and the assignment of telephone
numbers in a competitively neutral manner.
(b) The rules may not be inconsistent with the rules and
regulations of the Federal Communications Commission regarding
telecommunications number portability.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 60.083. INTERIM RETENTION OF CONSUMER NUMBERS. As an

interim measure, the commission shall adopt reasonable mechanisms,
including, at minimum, the use of call forwarding and direct inward
dialing, to allow consumers to retain their telephone numbers.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 60.084. RATES FOR INTERIM PORTABILITY MEASURES. (a) An

incumbent local exchange company with one million or more access
lines shall file tariffs, and the commission shall determine
reasonable rates to be charged by the company for:
(1) call forwarding;
(2) direct inward dialing; and
(3) any other mechanism the commission determines should be
used as an interim telecommunications number portability measure by a
new entrant.
(b) An incumbent local exchange company with fewer than one
million access lines that serves an area in which a certificate of
operating authority or a service provider certificate of operating
authority has been granted shall, not later than the 60th day after
the date of a bona fide request, file tariffs in accordance with
Subsection (a).

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(c) Not later than the 60th day after the date a company files
tariffs under Subsection (b), the commission shall determine
reasonable rates in accordance with Subsection (a).

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER F. PRICING
Sec. 60.101. PRICING RULE. (a) The commission shall adopt a
pricing rule.
(b) In adopting the pricing rule, the commission shall:
(1) ensure that each price for a monopoly service remains
affordable;
(2) ensure that each price for competitive service is not:
(A) unreasonably preferential, prejudicial, or
discriminatory;
(B) directly or indirectly subsidized by a
noncompetitive service; or
(C) predatory or anticompetitive; and
(3) require that each service recover the appropriate
costs, including joint and common costs, of each facility and
function used to provide the service.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 60.102. ADOPTION OF COST STUDIES BY CERTAIN COMPANIES.

The commission shall allow an incumbent local exchange company that
is not a Tier 1 local exchange company on September 1, 1995, to
adopt, at that company's option, the cost studies approved by the
commission for a Tier 1 local exchange company.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER G. INTERCONNECTION
Sec. 60.121. DEFINITION. In this subchapter, "interconnection"
means, for calls that originate and terminate in this state, the
termination of local intraexchange traffic of another local exchange
company or holder of a service provider certificate of operating
authority within the local calling area of the terminating local

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exchange company or certificate holder.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 60.122. EXCLUSIVE JURISDICTION. The commission has

exclusive jurisdiction to determine rates and terms for
interconnection for a holder of a certificate of convenience and
necessity, a certificate of operating authority, or a service
provider certificate of operating authority.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 60.123. INAPPLICABILITY OF SUBCHAPTER. This subchapter

does not apply to a rate for the existing termination of cellular or
interexchange traffic.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 60.124. INTEROPERABLE NETWORKS REQUIRED. (a) The

commission shall require each telecommunications provider to maintain
interoperable networks.
(b) The commission may:
(1) adopt rules, including generic rules that are
responsive to changes in federal law or a development in the local
exchange market; and
(2) set policies governing interconnection arrangements.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 60.125. DETERMINATION OF INTERCONNECTION RATES. (a)

Telecommunications providers shall negotiate network
interconnectivity, charges, and terms.
(b) If interconnectivity, charges, and terms are successfully
negotiated, the commission shall approve the interconnection rates.
(c) If telecommunications providers do not enter into a
mutually agreed compensation rate under this section, each provider
shall reciprocally terminate the other provider's traffic at no

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charge for the first nine months after the date the first call is
terminated between the providers.
(d) During the nine-month period prescribed by Subsection (c),
the commission shall complete a proceeding to establish reciprocal
interconnection rates and terms. The commission shall establish
reciprocal interconnection rates and terms based solely on the
commission proceeding.
(e) In establishing the initial interconnection rate, the
commission may not require cost studies from the new entrant.
(f) On or after the third anniversary of the date the first
call is terminated between the providers, the commission, on receipt
of a complaint, may require cost studies by a new entrant to
establish interconnection rates.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 60.126. INTERCONNECTIVITY NEGOTIATIONS; DISPUTE

RESOLUTION. The commission may resolve a dispute filed by a party to
a negotiation under Section 60.125(a).

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 60.127. ADOPTION OF APPROVED INTERCONNECTION RATES. (a)

An incumbent local exchange company may adopt the interconnection
rates the commission approves for a larger incumbent local exchange
company without additional cost justification.
(b) If an incumbent local exchange company does not adopt the
interconnection rates of a larger company or negotiates under Section
60.125(a), the company is governed by Sections 60.125(c)-(f).
(c) If the incumbent local exchange company adopts the
interconnection rates of another incumbent local exchange company,
the new entrant may adopt those rates as the new entrant's
interconnection rates.
(d) If the incumbent local exchange company elects to file its
own tariff, the new entrant must also file its own interconnection
tariff.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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Sec. 60.128. USE OF RATES RESTRICTED. The commission may not

use interconnection rates under this subchapter as a basis to alter
interconnection rates for other services.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER H. EXPANDED INTERCONNECTION

Sec. 60.141. EXPANDED INTERCONNECTION RULES. The commission
shall adopt rules for expanded interconnection that:
(1) are consistent with the rules and regulations of the
Federal Communications Commission relating to expanded
interconnection;
(2) treat intrastate private line services as special
access service; and
(3) provide that if an incumbent local exchange company is
required to provide expanded interconnection to another local
exchange company, the second local exchange company shall in a
similar manner provide expanded interconnection to the first company.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER I. LOCAL EXCHANGE COMPANY REQUIREMENTS

Sec. 60.161. INCUMBENT LOCAL EXCHANGE COMPANY REQUIREMENTS. An
incumbent local exchange company may not unreasonably:
(1) discriminate against another provider by refusing
access to the local exchange;
(2) refuse or delay an interconnection to another provider;
(3) degrade the quality of access the company provides to
another provider;
(4) impair the speed, quality, or efficiency of a line used
by another provider;
(5) fail to fully disclose in a timely manner on request
all available information necessary to design equipment that will
meet the specifications of the local exchange network; or
(6) refuse or delay access by a person to another provider.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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Sec. 60.162. EXPANDED INTERCONNECTION. This subchapter does

not require an incumbent local exchange company to provide expanded
interconnection as that term is defined by the Federal Communications
Commission.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 60.163. INFRASTRUCTURE SHARING. (a) The commission shall

adopt rules that require a local exchange company to share public
switched network infrastructure and technology with a requesting
local exchange company that lacks economies of scale or scope, to
enable the requesting company to provide telecommunications services
in each geographic area for which the requesting company is
designated as the sole carrier of last resort.
(b) The rules governing the sharing:
(1) may not require a local exchange company to make a
decision that is uneconomic or adverse to the public;
(2) shall permit, but may not require, joint ownership and
operation of public switched network infrastructure and services by
or among the local exchange companies that share infrastructure; and
(3) shall establish conditions that promote cooperation
between local exchange companies.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 60.164. PERMISSIBLE JOINT MARKETING. Except as prescribed

in Chapters 61, 62, and 63, the commission may not adopt any rule or
order that would prohibit a local exchange company from jointly
marketing or selling its products and services with the products and
services of any of its affiliates in any manner permitted by federal
law or applicable rules or orders of the Federal Communications
Commission.

Added by Acts 1999, 76th Leg., ch. 1212, Sec. 52, eff. Sept. 1, 1999.

Sec. 60.165. AFFILIATE RULE. Except as prescribed in Chapters

61, 62, and 63, the commission may not adopt any rule or order that
would prescribe for any local exchange company any affiliate rule,

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including any accounting rule, any cost allocation rule, or any

structural separation rule, that is more burdensome than federal law
or applicable rules or orders of the Federal Communications
Commission. Notwithstanding any other provision in this title, the
commission may not attribute or impute to a local exchange company a
price discount offered by an affiliate of the local exchange company
to the affiliate's customers. This section does not limit the
authority of the commission to consider a complaint brought under
Subchapter A, Chapter 52, Section 53.003, or this chapter.

Added by Acts 1999, 76th Leg., ch. 1212, Sec. 52, eff. Sept. 1, 1999.

SUBCHAPTER J. WHOLESALE CODE OF CONDUCT

Sec. 60.201. STATEMENT OF POLICY. It is the policy of this
state that providers of telecommunications services operate in a
manner that is consistent with minimum standards to provide customers
with continued competitive choices.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 24, eff.
September 7, 2005.

Sec. 60.202. APPLICABILITY OF SUBCHAPTER. A provision of this

subchapter applies only to the extent the provision has not been
preempted by federal law or a rule, regulation, or order of the
Federal Communications Commission.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 24, eff.
September 7, 2005.

Sec. 60.203. MINIMUM SERVICE REQUIREMENTS. A

telecommunications provider may not unreasonably:
(1) discriminate against another provider by refusing
access to an exchange;
(2) refuse or delay an interconnection to another provider;
(3) degrade the quality of access the telecommunications
provider provides to another provider;
(4) impair the speed, quality, or efficiency of a line used
by another provider;

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(5) fail to fully disclose in a timely manner on request

all available information necessary to design equipment that will
meet the specifications of the network; or
(6) refuse or delay access by a person to another provider.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 24, eff.
September 7, 2005.

Sec. 60.204. INTERCONNECTION. A telecommunications provider

shall provide interconnection with other telecommunications
providers' networks for the transmission and routing of telephone
exchange service and exchange access.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 24, eff.
September 7, 2005.

Sec. 60.205. NUMBER PORTABILITY. A telecommunications provider

shall provide number portability in accordance with federal
requirements.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 24, eff.
September 7, 2005.

Sec. 60.206. DUTY TO NEGOTIATE. A telecommunications provider

shall negotiate in good faith the terms and conditions of any
agreement.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 24, eff.
September 7, 2005.

Sec. 60.207. DIALING PARITY. (a) A telecommunications

provider shall provide dialing parity to competing telecommunications
providers of telephone exchange service and telephone toll service.
(b) A telecommunications provider shall provide
nondiscriminatory access to telephone numbers, operator services,
directory assistance, and directory listings and may not delay that
access unreasonably.

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Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 24, eff.
September 7, 2005.

Sec. 60.208. ACCESS TO RIGHTS-OF-WAY. A telecommunications

provider shall provide access to poles, ducts, conduits, and rights-
of-way to competing providers of telecommunications service on rates,
terms, and conditions that are just, reasonable, and
nondiscriminatory.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 24, eff.
September 7, 2005.

Sec. 60.209. RECIPROCAL COMPENSATION. A telecommunications

provider shall establish reciprocal compensation arrangements for the
transport and termination of telecommunications.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 24, eff.
September 7, 2005.

Sec. 60.210. ACCESS TO SERVICES. A telecommunications provider

shall provide access to:
(1) 911 and E-911 service;
(2) directory assistance service to allow other
telecommunications providers' customers to obtain telephone numbers;
and
(3) operator call completion service.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 24, eff.
September 7, 2005.

CHAPTER 62. BROADCASTER SAFEGUARDS

SUBCHAPTER A. GENERAL PROVISIONS
Sec. 62.001. APPLICABILITY OF CHAPTER. This chapter does not
apply to a cable company.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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Sec. 62.002. DEFINITIONS. In this chapter:

(1) "Audio programming":
(A) means programming:
(i) provided by an amplitude modulation or
frequency modulation broadcast radio station; or
(ii) generally considered comparable to programming
described by Subparagraph (i); and
(B) does not include an audio-related service offered
by an incumbent local exchange company on September 1, 1995.
(2) "Video programming" means programming provided by or
generally considered comparable to programming provided by a
television broadcast station as defined by Section 602,
Communications Act of 1934 (47 U.S.C. Section 522).

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 62.003. REQUIREMENTS RELATING TO AUDIO AND VIDEO

PROGRAMMING. (a) This section applies only to a provider of
advanced services or local exchange telephone service that has more
than 500,000 access lines in service in this state and that delivers
audio programming with localized content or video programming to its
subscribers in those service areas where such provider is not
regulated as a cable system under federal law.
(b) Notwithstanding any other provision of this title, a
provider of advanced services or local exchange telephone service
shall provide subscribers access to the signals of the local
broadcast television and radio stations licensed by the Federal
Communications Commission to serve those subscribers over the air;
provided with respect to low power television stations, this section
shall only apply to those low power television stations that are
"qualified low power stations" as defined in 47 U.S.C. Section
534(h)(2).
(c) To facilitate access by subscribers of a provider of
advanced services or local exchange telephone service to the signals
of local broadcast stations, a station either shall be granted
mandatory carriage or may request retransmission consent with the
provider.
(d) This title does not require a provider of advanced services
or local exchange telephone service to provide a television or radio

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station valuable consideration in exchange for carriage.

(e) A provider of advanced services or local exchange telephone
service shall transmit without degradation the signals a local
broadcast station delivers to the provider. The transmission quality
offered a broadcast station may not be lower than the quality made
available to another broadcast station or video or audio programming
source.
(f) A provider of advanced services or local exchange telephone
service that delivers audio or video programming to its subscribers
may not:
(1) discriminate among broadcast stations or between
broadcast stations on the one hand and programming providers on the
other with respect to transmission of their signals, taking into
account any consideration afforded a provider of advanced services or
local exchange telephone service by any such programming provider or
broadcast station; or
(2) delete, change, or alter a copyright identification
transmitted as part of a broadcast station's signal.
(g) A provider of advanced services or local exchange telephone
service that delivers audio or video programming shall be subject to
any applicable network nonduplication or syndicated exclusivity rules
promulgated by the Federal Communications Commission to the extent
applicable to cable systems as defined by the commission.
(h) A provider of advanced services or local exchange telephone
service that delivers audio or video programming to its subscribers
shall include all programming providers in a subscriber programming
guide, if any, that lists program schedules.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 25, eff.
September 7, 2005.

CHAPTER 64. CUSTOMER PROTECTION

SUBCHAPTER A. GENERAL PROVISIONS
Sec. 64.001. CUSTOMER PROTECTION POLICY. (a) The legislature
finds that new developments in telecommunications services, as well
as changes in market structure, marketing techniques, and technology,
make it essential that customers have safeguards against fraudulent,
unfair, misleading, deceptive, or anticompetitive business practices
and against businesses that do not have the technical and financial

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resources to provide adequate service.

(b) The purpose of this chapter is to establish customer
protection standards and confer on the commission authority to adopt
and enforce rules to protect customers from fraudulent, unfair,
misleading, deceptive, or anticompetitive practices.
(c) Nothing in this section shall be construed to abridge
customer rights set forth in commission rules in effect at the time
of the enactment of this chapter.
(d) This chapter does not limit the constitutional, statutory,
and common law authority of the office of the attorney general.

Added by Acts 1999, 76th Leg., ch. 1212, Sec. 55, eff. Sept. 1, 1999.

Sec. 64.002. DEFINITIONS. In this chapter:

(1) "Billing agent" means any entity that submits charges
to the billing utility on behalf of itself or any provider of a
product or service.
(2) "Billing utility" means any telecommunications
provider, as defined by Section 51.002, that issues a bill directly
to a customer for any telecommunications product or service.
(3) "Certificated telecommunications utility" means a
telecommunications utility that has been granted either a certificate
of convenience and necessity, a certificate of operating authority,
or a service provider certificate of operating authority.
(4) "Customer" means any person in whose name telephone
service is billed, including individuals, governmental units at all
levels of government, corporate entities, and any other entity with
legal capacity to be billed for telephone service.
(5) "Service provider" means any entity that offers a
product or service to a customer and that directly or indirectly
charges to or collects from a customer's bill an amount for the
product or service on a customer's bill received from a billing
utility.
(6) "Telecommunications utility" has the meaning assigned
by Section 51.002.

Added by Acts 1999, 76th Leg., ch. 1212, Sec. 55, eff. Sept. 1, 1999.

Sec. 64.004. CUSTOMER PROTECTION STANDARDS. (a) All buyers of

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telecommunications services are entitled to:

(1) protection from fraudulent, unfair, misleading,
deceptive, or anticompetitive practices, including protection from
being billed for services that were not authorized or provided;
(2) choice of a telecommunications service provider and to
have that choice honored;
(3) information in English and Spanish and any other
language as the commission deems necessary concerning rates, key
terms, and conditions;
(4) protection from discrimination on the basis of race,
color, sex, nationality, religion, marital status, income level, or
source of income and from unreasonable discrimination on the basis of
geographic location;
(5) impartial and prompt resolution of disputes with a
certificated telecommunications utility and disputes with a
telecommunications service provider related to unauthorized charges
and switching of service;
(6) privacy of customer consumption and credit information;
(7) accuracy of billing;
(8) bills presented in a clear, readable format and easy-
to-understand language;
(9) information in English and Spanish and any other
language as the commission deems necessary concerning low-income
assistance programs and deferred payment plans;
(10) all consumer protections and disclosures established
by the Fair Credit Reporting Act (15 U.S.C. Section 1681 et seq.) and
the Truth in Lending Act (15 U.S.C. Section 1601 et seq.); and
(11) programs that offer eligible low-income customers an
affordable rate package and bill payment assistance programs designed
to reduce uncollectible accounts.
(b) The commission may adopt and enforce rules as necessary or
appropriate to carry out this section, including rules for minimum
service standards for a certificated telecommunications utility
relating to customer deposits and the extension of credit, switching
fees, termination of service, an affordable rate package, and bill
payment assistance programs for low-income customers. The commission
may waive language requirements for good cause.
(c) The commission shall request the comments of the office of
the attorney general in developing the rules that may be necessary or
appropriate to carry out this section.

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(d) The commission shall coordinate its enforcement efforts

regarding the prosecution of fraudulent, misleading, deceptive, and
anticompetitive business practices with the office of the attorney
general in order to ensure consistent treatment of specific alleged
violations.
(e) Nothing in this section shall be construed to abridge
customer rights set forth in commission rules in effect at the time
of the enactment of this chapter.

Added by Acts 1999, 76th Leg., ch. 1212, Sec. 55, eff. Sept. 1, 1999.

SUBCHAPTER B. CERTIFICATION, REGISTRATION, AND REPORTING REQUIREMENTS

Sec. 64.051. ADOPTION OF RULES. (a) The commission shall
adopt rules relating to certification, registration, and reporting
requirements for a certificated telecommunications utility, all
telecommunications utilities that are not dominant carriers, and pay
telephone providers.
(b) The rules adopted under Subsection (a) shall be consistent
with and no less effective than federal law and may not require the
disclosure of highly sensitive competitive or trade secret
information.

Added by Acts 1999, 76th Leg., ch. 1212, Sec. 55, eff. Sept. 1, 1999.

Sec. 64.052. SCOPE OF RULES. The commission may adopt and

enforce rules to:
(1) require certification or registration with the
commission as a condition of doing business in this state;
(2) amend certificates or registrations to reflect changed
ownership and control;
(3) establish rules for customer service and protection;
(4) suspend or revoke certificates or registrations for
repeated violations of this chapter or commission rules, except that
the commission may not revoke a certificate of convenience and
necessity of a telecommunications utility except as provided by
Section 54.008; and
(5) order disconnection of a pay telephone service
provider's pay telephones or revocation of certification or
registration for repeated violations of this chapter or commission

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rules.

Added by Acts 1999, 76th Leg., ch. 1212, Sec. 55, eff. Sept. 1, 1999.

Sec. 64.053. REPORTS. The commission may require a

telecommunications service provider to submit reports to the
commission concerning any matter over which it has authority under
this chapter.

Added by Acts 1999, 76th Leg., ch. 1212, Sec. 55, eff. Sept. 1, 1999.

SUBCHAPTER C. CUSTOMER'S RIGHT TO CHOICE

Sec. 64.101. POLICY. It is the policy of this state that all
customers be protected from the unauthorized switching of a
telecommunications service provider selected by the customer to
provide service.

Added by Acts 1999, 76th Leg., ch. 1212, Sec. 55, eff. Sept. 1, 1999.

Sec. 64.102. RULES RELATING TO CHOICE. The commission shall

adopt and enforce rules that:
(1) ensure that customers are protected from deceptive
practices employed in obtaining authorizations of service and in the
verification of change orders, including negative option marketing,
sweepstakes, and contests that cause customers to unknowingly change
their telecommunications service provider;
(2) provide for clear, easily understandable
identification, in each bill sent to a customer, of all
telecommunications service providers submitting charges on the bill;
(3) ensure that every service provider submitting charges
on the bill is clearly and easily identified on the bill along with
its services, products, and charges;
(4) provide that unauthorized changes in service be
remedied at no cost to the customer within a period established by
the commission;
(5) require refunds or credits to the customer in the event
of an unauthorized change; and
(6) provide for penalties for violations of commission

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rules adopted under this section, including fines and revocation of

certificates or registrations, by this action denying the
certificated telecommunications utility the right to provide service
in this state, except that the commission may not revoke a
certificate of convenience and necessity of a telecommunications
utility except as provided by Section 54.008.

Added by Acts 1999, 76th Leg., ch. 1212, Sec. 55, eff. Sept. 1, 1999.

SUBCHAPTER D. PROTECTION AGAINST UNAUTHORIZED CHARGES

Sec. 64.151. REQUIREMENTS FOR SUBMITTING CHARGES. (a) A
service provider or billing agent may submit charges for a new
product or service to be billed on a customer's telephone bill on or
after the effective date of this section only if:
(1) the service provider offering the product or service
has thoroughly informed the customer of the product or service being
offered, including all associated charges, and has explicitly
informed the customer that the associated charges for the product or
service will appear on the customer's telephone bill;
(2) the customer has clearly and explicitly consented to
obtain the product or service offered and to have the associated
charges appear on the customer's telephone bill and the consent has
been verified as provided by Subsection (b); and
(3) the service provider offering the product or service
and any billing agent for the service provider:
(A) has provided the customer with a toll-free
telephone number the customer may call and an address to which the
customer may write to resolve any billing dispute and to answer
questions; and
(B) has contracted with the billing utility to bill for
products and services on the billing utility's bill as provided by
Subsection (c).
(b) The customer consent required by Subsection (a)(2) must be
verified by the service provider offering the product or service by
authorization from the customer. A record of the customer consent,
including verification, must be maintained by the service provider
offering the product or service for a period of at least 24 months
immediately after the consent and verification have been obtained.
The method of obtaining customer consent and verification must

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include one or more of the following:

(1) written authorization from the customer;
(2) toll-free electronic authorization placed from the
telephone number that is the subject of the product or service;
(3) oral authorization obtained by an independent third
party; or
(4) any other method of authorization approved by the
commission or the Federal Communications Commission.
(c) The contract required by Subsection (a)(3)(B) must include
the service provider's name, business address, and business telephone
number and shall be maintained by the billing utility for as long as
the billing for the products and services continues and for the 24
months immediately following the permanent discontinuation of the
billing.
(d) A service provider offering a product or service to be
charged on a customer's telephone bill and any billing agent for the
service provider may not use any fraudulent, unfair, misleading,
deceptive, or anticompetitive marketing practice to obtain customers,
including the use of negative option marketing, sweepstakes, and
contests.
(e) Unless verification is required by federal law or rules
implementing federal law, Subsection (b) does not apply to customer-
initiated transactions with a certificated telecommunications
provider for which the service provider has the appropriate
documentation.
(f) If a service provider is notified by a billing utility that
a customer has reported to the billing utility that a charge made by
the service provider is unauthorized, the service provider shall
cease to charge the customer for the unauthorized product or service.
(g) This section does not apply to message telecommunications
services charges that are initiated by dialing 1+, 0+, 0-, 1010XXX,
or collect calls and charges for video services if the service
provider has the necessary call detail record to establish the
billing for the call or service.

Added by Acts 1999, 76th Leg., ch. 1212, Sec. 55, eff. Sept. 1, 1999.

Sec. 64.152. RESPONSIBILITIES OF BILLING UTILITY. (a) If a

customer's telephone bill is charged for any product or service

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without proper customer consent or verification, the billing utility,

on its knowledge or notification of any unauthorized charge, shall
promptly, not later than 45 days after the date of knowledge or
notification of the charge:
(1) notify the service provider to cease charging the
customer for the unauthorized product or service;
(2) remove any unauthorized charge from the customer's
bill;
(3) refund or credit to the customer all money that has
been paid by the customer for any unauthorized charge, and if the
unauthorized charge is not adjusted within three billing cycles,
shall pay interest on the amount of the unauthorized charge;
(4) on the customer's request, provide the customer with
all billing records under its control related to any unauthorized
charge within 15 business days after the date of the removal of the
unauthorized charge from the customer's bill; and
(5) maintain for at least 24 months a record of every
customer who has experienced any unauthorized charge for a product or
service on the customer's telephone bill and who has notified the
billing utility of the unauthorized charge.
(b) A record required by Subsection (a)(5) shall contain for
each unauthorized charge:
(1) the name of the service provider that offered the
product or service;
(2) any affected telephone numbers or addresses;
(3) the date the customer requested that the billing
utility remove the unauthorized charge;
(4) the date the unauthorized charge was removed from the
customer's telephone bill; and
(5) the date any money that the customer paid for the
unauthorized charges was refunded or credited to the customer.
(c) A billing utility may not:
(1) disconnect or terminate telecommunications service to
any customer for nonpayment of an unauthorized charge; or
(2) file an unfavorable credit report against a customer
who has not paid charges the customer has alleged were unauthorized
unless the dispute regarding the unauthorized charge is ultimately
resolved against the customer, except that the customer shall remain
obligated to pay any charges that are not in dispute, and this
subsection does not apply to those undisputed charges.

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Added by Acts 1999, 76th Leg., ch. 1212, Sec. 55, eff. Sept. 1, 1999.

Sec. 64.153. RECORDS OF DISPUTED CHARGES. (a) Every service

provider shall maintain a record of every disputed charge for a
product or service placed on a customer's bill.
(b) The record required under Subsection (a) shall contain for
every disputed charge:
(1) any affected telephone numbers or addresses;
(2) the date the customer requested that the billing
utility remove the unauthorized charge;
(3) the date the unauthorized charge was removed from the
customer's telephone bill; and
(4) the date action was taken to refund or credit to the
customer any money that the customer paid for the unauthorized
charges.
(c) The record required by Subsection (a) shall be maintained
for at least 24 months following the completion of all steps required
by Section 64.152(a).

Added by Acts 1999, 76th Leg., ch. 1212, Sec. 55, eff. Sept. 1, 1999.

Sec. 64.154. NOTICE. (a) A billing utility shall provide

notice of a customer's rights under this section in the manner
prescribed by the commission.
(b) Notice of a customer's rights must be provided by mail to
each residential and retail business customer within 60 days of the
effective date of this section or by inclusion in the publication of
the telephone directory next following the effective date of this
section. In addition, each billing utility shall send the notice to
new customers at the time service is initiated or to any customer at
that customer's request.

Added by Acts 1999, 76th Leg., ch. 1212, Sec. 55, eff. Sept. 1, 1999.

Sec. 64.155. PROVIDING COPY OF RECORDS. A billing utility

shall provide a copy of records maintained under Sections 64.151(c),
64.152, and 64.154 to the commission staff on request. A service
provider shall provide a copy of records maintained under Sections

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64.151(b) and 64.153 to the commission on request.

Added by Acts 1999, 76th Leg., ch. 1212, Sec. 55, eff. Sept. 1, 1999.

Sec. 64.156. VIOLATIONS. (a) If the commission finds that a

billing utility violated this subchapter, the commission may
implement penalties and other enforcement actions under Chapter 15.
(b) If the commission finds that any other service provider or
billing agent subject to this subchapter has violated this subchapter
or has knowingly provided false information to the commission on
matters subject to this subchapter, the commission may enforce the
provisions of Chapter 15 against the service provider or billing
agent as if it were regulated by the commission.
(c) Neither the authority granted under this section nor any
other provision of this subchapter shall be construed to grant the
commission jurisdiction to regulate service providers or billing
agents who are not otherwise subject to commission regulation, other
than as specifically provided by this chapter.
(d) If the commission finds that a billing utility or service
provider repeatedly violates this subchapter, the commission may, if
the action is consistent with the public interest, suspend, restrict,
or revoke the registration or certificate of the telecommunications
service provider, by this action denying the telecommunications
service provider the right to provide service in this state, except
that the commission may not revoke a certificate of convenience and
necessity of a telecommunications utility except as provided by
Section 54.008.
(e) If the commission finds that a service provider or billing
agent has repeatedly violated any provision of this subchapter, the
commission may order the billing utility to terminate billing and
collection services for that service provider or billing agent.
(f) Nothing in this subchapter shall be construed to preclude a
billing utility from taking action on its own to terminate or
restrict its billing and collection services.

Added by Acts 1999, 76th Leg., ch. 1212, Sec. 55, eff. Sept. 1, 1999.

Sec. 64.157. DISPUTES. (a) The commission may resolve

disputes between a retail customer and a billing utility, service

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provider, or telecommunications utility.

(b) In exercising its authority under Subsection (a), the
commission may:
(1) order a billing utility or service provider to produce
information or records;
(2) require that all contracts, bills, and other
communications from a billing utility or service provider display a
working toll-free telephone number that customers may call with
complaints and inquiries;
(3) require a billing utility or service provider to refund
or credit overcharges or unauthorized charges with interest if the
billing utility or service provider has failed to comply with
commission rules or a contract with the customer;
(4) order appropriate relief to ensure that a customer's
choice of a telecommunications service provider is honored;
(5) require the continuation of service to a residential or
small commercial customer while a dispute is pending regarding
charges the customer has alleged were unauthorized; and
(6) investigate an alleged violation.
(c) The commission shall adopt procedures for the resolution of
disputes in a timely manner, which in no event shall exceed 60 days.

Added by Acts 1999, 76th Leg., ch. 1212, Sec. 55, eff. Sept. 1, 1999.

Sec. 64.158. CONSISTENCY WITH FEDERAL LAW. Rules adopted by

the commission under this subchapter shall be consistent with and not
more burdensome than applicable federal laws and rules.

Added by Acts 1999, 76th Leg., ch. 1212, Sec. 55, eff. Sept. 1, 1999.

SUBCHAPTER E. PUBLICATION OF MOBILE SERVICE CUSTOMER TELEPHONE

NUMBERS
Sec. 64.201. DEFINITION. In this subchapter, "commercial
mobile service provider" means a provider of commercial mobile
service as defined by Section 332(d), Communications Act of 1934 (47
U.S.C. Section 151 et seq.), Federal Communications Commission rules,
and the Omnibus Budget Reconciliation Act of 1993 (Pub. L. No. 103-
66).

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Added by Acts 2005, 79th Leg., Ch. 226 (H.B. 2553), Sec. 1, eff.
September 1, 2005.

Sec. 64.202. CONSENT REQUIRED. (a) A commercial mobile

service provider doing business in this state may not publish in a
directory or provide for publication in a directory the name and
telephone number of a mobile service customer in this state without
the express consent of the customer. The consent of a customer must
be given:
(1) in writing on a separate document that includes the
customer's signature and the date;
(2) verbally; or
(3) on a website maintained by the commercial mobile
service provider.
(b) Before a customer consents under Subsection (a), a
commercial mobile service provider must disclose to the customer in
writing or verbally, as appropriate, that:
(1) by consenting the customer agrees to have the
customer's telephone number sold or licensed as part of a list of
customers and the customer's telephone number may be included in a
publicly available directory; and
(2) if the customer's calling plan bills the customer for
unsolicited calls or text messages from a telemarketer, by consenting
to have the customer's telephone number sold or licensed as part of a
list of customers or be included in a publicly available directory,
the customer may incur additional charges for receiving unsolicited
calls or text messages.
(c) A customer who consents under Subsection (a) may revoke
that consent at any time. A commercial mobile service provider shall
comply with the customer's request not later than the 60th day after
the date the request is made.
(d) A commercial mobile service provider may not bill a mobile
services customer for not consenting under Subsection (a).

Added by Acts 2005, 79th Leg., Ch. 226 (H.B. 2553), Sec. 1, eff.
September 1, 2005.

Sec. 64.203. VIOLATIONS. (a) The attorney general may

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investigate violations of this subchapter and file civil enforcement

actions seeking injunctive relief, attorney's fees, and civil
penalties in an amount not to exceed $1,000 for each violation. If
the court finds the defendant wilfully or knowingly violated this
subchapter, the court may increase the amount of the civil penalties
to an amount not to exceed $3,000 for each violation.
(b) Chapter 15 does not apply to a violation of this
subchapter.

Added by Acts 2005, 79th Leg., Ch. 226 (H.B. 2553), Sec. 1, eff.
September 1, 2005.

CHAPTER 65. DEREGULATION OF CERTAIN INCUMBENT LOCAL EXCHANGE COMPANY

MARKETS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 65.001. STATEMENT OF POLICY. It is the policy of this
state to provide for full rate and service competition in the
telecommunications market of this state so that customers may benefit
from innovations in service quality and market-based pricing.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 26, eff.
September 7, 2005.

Sec. 65.002. DEFINITIONS. In this chapter:

(1) "Deregulated company" means an incumbent local exchange
company for which all of the company's markets have been deregulated.
(2) "Market" means an exchange in which an incumbent local
exchange company provides residential local exchange telephone
service.
(3) "Regulated company" means an incumbent local exchange
company for which none of the company's markets have been
deregulated.
(4) "Stand-alone residential local exchange voice service"
means:
(A) residential tone dialing service;
(B) services and functionalities supported under the
lifeline program;
(C) access for all residential end users to 911 service
provided by a local authority and access to dual party relay service;

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(D) at the election of the incumbent local exchange

company, mandatory residential extended area service arrangements,
mandatory residential extended metropolitan service or other
mandatory residential toll-free calling arrangements, mandatory
expanded local calling service arrangements, or another service that
a company is required under a tariff to provide to a customer who
subscribes or may subscribe to basic network services;
(E) flat rate residential local exchange telephone
service delivered by landline, but only if the service is ordered and
received independent of:
(i) a service classified as a nonbasic service
under Section 58.151 or residential call waiting service;
(ii) a package of services that includes a service
classified as a nonbasic service under Section 58.151; or
(iii) another flat rate residential local exchange
service delivered by landline; and
(F) residential caller identification services if the
customer to whom the service is billed is at least 65 years of age.
(5) "Transitioning company" means an incumbent local
exchange company for which at least one, but not all, of the
company's markets has been deregulated.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 26, eff.
September 7, 2005.

Sec. 65.003. COMMISSION AUTHORITY. (a) Notwithstanding any

other provisions of this title, the commission has authority to
implement and enforce this chapter.
(b) The commission may adopt rules and conduct proceedings
necessary to administer and enforce this chapter, including rules to
determine whether a market should remain regulated, should be
deregulated, or should be reregulated.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 26, eff.
September 7, 2005.

Sec. 65.004. INFORMATION. (a) The commission may collect and

compile information from all telecommunications providers as
necessary to implement and enforce this chapter.

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(b) The commission shall maintain the confidentiality of

information collected under this chapter that is claimed to be
confidential for competitive purposes. Information that is claimed
to be confidential is exempt from disclosure under Chapter 552,
Government Code.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 26, eff.
September 7, 2005.

Sec. 65.005. CUSTOMER PROTECTION. This chapter does not affect

a customer's right to complain to the commission regarding a
telecommunications provider.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 26, eff.
September 7, 2005.

SUBCHAPTER B. DETERMINATION OF WHETHER MARKET SHOULD BE REGULATED

Sec. 65.051. MARKETS DEREGULATED. A market that is deregulated
as of September 1, 2011, shall remain deregulated. Notwithstanding
any other provision of this title, the commission may not reregulate
a market or company that has been deregulated.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 26, eff.
September 7, 2005.
Amended by:
Acts 2011, 82nd Leg., R.S., Ch. 98 (S.B. 980), Sec. 14, eff.
September 1, 2011.

Sec. 65.052. DETERMINATION OF WHETHER A MARKET SHOULD REMAIN

REGULATED. (a) An incumbent local exchange company may petition the
commission to deregulate a market of the company that the commission
previously determined should remain regulated. Notwithstanding any
other provision of this title, only the incumbent local exchange
company may initiate a proceeding to deregulate one of the company's
markets. Not later than the 90th day after the date the commission
receives the petition, the commission shall:
(1) determine whether the regulated market should remain
regulated; and

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(2) issue a final order classifying the market in

accordance with this section.
(b) In making a determination under Subsection (a), the
commission may not determine that a market should remain regulated
if:
(1) the population in the area included in the market is at
least 100,000; or
(2) the population in the area included in the market is
less than 100,000 and, in addition to the incumbent local exchange
company, there are at least two competitors operating in all or part
of the market that:
(A) are unaffiliated with the incumbent local exchange
company; and
(B) provide voice communications service without regard
to the delivery technology, including through:
(i) Internet Protocol or a successor protocol;
(ii) satellite; or
(iii) a technology used by a wireless provider or a
commercial mobile service provider, as that term is defined by
Section 64.201.
(c) If the commission deregulates a market under this section
and the deregulation results in a regulated or transitioning company
no longer meeting the definition of a regulated or transitioning
company, the commission shall issue an order reclassifying the
company as a transitioning company or deregulated company, as those
terms are defined by Section 65.002.
(d) Repealed by Acts 2011, 82nd Leg., R.S., Ch. 98, Sec. 21(3),
eff. September 1, 2011.
(e) Repealed by Acts 2011, 82nd Leg., R.S., Ch. 98, Sec. 21(3),
eff. September 1, 2011.
(f) Repealed by Acts 2011, 82nd Leg., R.S., Ch. 98, Sec. 21(3),
eff. September 1, 2011.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 26, eff.
September 7, 2005.
Amended by:
Acts 2011, 82nd Leg., R.S., Ch. 98 (S.B. 980), Sec. 15, eff.
September 1, 2011.
Acts 2011, 82nd Leg., R.S., Ch. 98 (S.B. 980), Sec. 21(3), eff.
September 1, 2011.

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Sec. 65.053. INCUMBENT LOCAL EXCHANGE COMPANY MARKETS. (a)

Notwithstanding Section 65.052, an incumbent local exchange company
may elect to have all of the company's markets remain regulated on
and after January 1, 2006.
(b) To make an election under Subsection (a), an incumbent
local exchange company must file an affidavit with the commission
making that election not later than December 1, 2005.
(c) If an incumbent local exchange company makes an election
under this section, the commission shall issue an order classifying
the company as a regulated company that is subject to the provisions
of this title that applied to the company on September 1, 2005. This
subsection does not affect the authority of a regulated company to
elect under Chapter 58 or 59 after January 1, 2005, and to be
regulated under the chapter under which the company elected.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 26, eff.
September 7, 2005.

SUBCHAPTER C. DEREGULATED COMPANY

Sec. 65.101. ISSUANCE OF CERTIFICATE OF OPERATING AUTHORITY.
(a) A deregulated company may petition the commission to relinquish
the company's certificate of convenience and necessity and receive a
certificate of operating authority.
(b) The commission shall issue the deregulated company a
certificate of operating authority and rescind the deregulated
company's certificate of convenience and necessity if the commission
finds that all of the company's markets have been deregulated under
Subchapter B.
(c) A deregulated company that holds a certificate of operating
authority is a nondominant carrier.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 26, eff.
September 7, 2005.
Amended by:
Acts 2013, 83rd Leg., R.S., Ch. 210 (S.B. 259), Sec. 4, eff.
September 1, 2013.

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Sec. 65.102. REQUIREMENTS. (a) A deregulated company that

holds a certificate of operating authority issued under this
subchapter is not required to:
(1) fulfill the obligations of a provider of last resort;
(2) comply with retail quality of service standards or
reporting requirements;
(3) file an earnings report with the commission unless the
company is receiving support from the Texas High Cost Universal
Service Plan; or
(4) comply with a pricing requirement other than a
requirement prescribed by this subchapter.
(b) Notwithstanding any other provision of this title, the
commission has only the authority provided by this section over a
deregulated company that holds a certificate of operating authority
issued under this subchapter. Subject to Subsection (c), the
following provisions apply to a deregulated company and may be
enforced by the commission using the remedies provided by Subchapter
B, Chapter 15, and Subsection (d):
(1) Subchapter A, Chapter 15;
(2) Subchapters A, C, and D, Chapter 17, as applicable to
carriers holding a certificate of operating authority;
(3) Sections 52.007, 52.060, and 52.156;
(4) Sections 54.001, 54.002, 54.003, 54.004, 54.005,
54.006, 54.008(a), 54.101, 54.102, 54.103, 54.105, 54.151, 54.156,
54.158, 54.159, 54.255, 54.256, 54.257, 54.259, 54.260, and 54.261;
(5) Sections 55.010, 55.123, 55.133, 55.134, 55.136, and
55.137;
(6) Chapter 56, except Subchapters F and G;
(7) Chapter 60;
(8) Chapter 62;
(9) Subchapter E, Chapter 64;
(10) Sections 65.001, 65.002, 65.003, and 65.004, this
subchapter, and Subchapter E of this chapter; and
(11) Chapter 66.
(c) Nothing in this subchapter affects the continuing
applicability of the following provisions of this title:
(1) Sections 51.003 and 51.010(c);
(2) Section 52.002(d);
(3) Sections 54.204, 54.205, and 54.206; and
(4) Section 65.051.

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(d) The commission may hear complaints of retail and wholesale

customers against deregulated companies that are in the scope of the
commission's authority provided by this section.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 26, eff.
September 7, 2005.
Amended by:
Acts 2011, 82nd Leg., R.S., Ch. 98 (S.B. 980), Sec. 16, eff.
September 1, 2011.
Acts 2013, 83rd Leg., R.S., Ch. 210 (S.B. 259), Sec. 5, eff.
September 1, 2013.
Acts 2017, 85th Leg., R.S., Ch. 29 (S.B. 1003), Sec. 1, eff.
September 1, 2017.

SUBCHAPTER D. TRANSITIONING COMPANY

Sec. 65.151. PROVISIONS APPLICABLE TO TRANSITIONING COMPANY.
(a) Except as provided by Subsection (b), a transitioning company is
governed by this subchapter and the provisions of this title that
applied to the company immediately before the date the company was
classified as a transitioning company. If there is a conflict
between this subchapter and the other applicable provisions of this
title, this subchapter controls.
(b) A transitioning company is not required to fulfill the
obligations of a provider of last resort in a deregulated market.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 26, eff.
September 7, 2005.
Amended by:
Acts 2011, 82nd Leg., R.S., Ch. 98 (S.B. 980), Sec. 17, eff.
September 1, 2011.

Sec. 65.152. GENERAL REQUIREMENTS. (a) A transitioning

company may:
(1) exercise pricing flexibility in a market subject only
to the price and rate standards prescribed by Sections 65.153 and
65.154; and
(2) introduce a new service in a market subject only to the
price and rate standards prescribed by Sections 65.153 and 65.154.
(b) A transitioning company may not be required to:

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(1) comply with retail quality of service standards or

reporting requirements in a market that is deregulated; or
(2) file an earnings report with the commission unless the
company is receiving support from the Texas High Cost Universal
Service Plan.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 26, eff.
September 7, 2005.
Amended by:
Acts 2011, 82nd Leg., R.S., Ch. 98 (S.B. 980), Sec. 18, eff.
September 1, 2011.

Sec. 65.153. RATE REQUIREMENTS. (a) In a market that remains

regulated, a transitioning company shall price the company's retail
services in accordance with the provisions that applied to that
company immediately before the date the company was classified as a
transitioning company.
(b) In a market that is deregulated, a transitioning company
shall price the company's retail services as follows:
(1) for all services, other than basic local
telecommunications service, at any price higher than the service's
long run incremental cost; and
(2) for basic local telecommunications service, at any
price higher than the lesser of the service's long run incremental
cost or the tariffed price on the date that market was deregulated,
provided that the company may not increase the company's rates for
stand-alone residential local exchange voice service before the date
that the commission has the opportunity to revise the monthly per
line support under the Texas High Cost Universal Service Plan
pursuant to Section 56.031, regardless of whether the company is an
electing company under Chapter 58.
(c) Except as provided by Subsection (c-1), in each deregulated
market, a transitioning company shall make available to all
residential customers uniformly throughout that market the same
price, terms, and conditions for all basic and non-basic services,
consistent with any pricing flexibility available to such company.
(c-1) A transitioning company may offer to an individual
residential customer a promotional offer that is not available
uniformly throughout the market if the company makes the offer

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through a medium other than direct mail or mass electronic media and
the offer is intended to retain or obtain a customer.
(d) In any market, regardless of whether regulated or
deregulated, the transitioning company may not:
(1) establish a retail rate, term, or condition that is
anticompetitive or unreasonably preferential, prejudicial, or
discriminatory;
(2) establish a retail rate for a basic or non-basic
service in a deregulated market that is subsidized either directly or
indirectly by a basic or non-basic service provided in an exchange
that is not deregulated; or
(3) engage in predatory pricing or attempt to engage in
predatory pricing.
(e) A rate that meets the pricing requirements in Subsection
(b) shall be deemed compliant with Subsection (d)(2).

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 26, eff.
September 7, 2005.
Amended by:
Acts 2011, 82nd Leg., R.S., Ch. 98 (S.B. 980), Sec. 19, eff.
September 1, 2011.

Sec. 65.154. RATE AND PRICE REQUIREMENTS NOT APPLICABLE. (a)

A transitioning company is not required to comply with the following
requirements prescribed by this title on submission of a written
notice to the commission:
(1) a direct or indirect requirement to price a residential
service at, above, or according to the long-run incremental cost of
the service or to otherwise use long-run incremental cost in
establishing prices for residential services; or
(2) a requirement to file with the commission a long-run
incremental cost study for residential or business services.
(b) Notwithstanding Subsection (a), a transitioning company may
not:
(1) establish a retail rate, price, term, or condition that
is anticompetitive or unreasonably preferential, prejudicial, or
discriminatory;
(2) establish a retail rate for a basic or non-basic
service in a deregulated market that is subsidized either directly or

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indirectly by a basic or non-basic service provided in an exchange

that is not deregulated; or
(3) engage in predatory pricing or attempt to engage in
predatory pricing.
(c) A rate or price for a basic local telecommunications
service is not anticompetitive, predatory, or unreasonably
preferential, prejudicial, or discriminatory if the rate or price is
equal to or greater than the rate or price in the transitioning
company's tariff for that service in effect on the date the
transitioning company submits notice to the commission under
Subsection (a).
(d) This section, including Subsection (a)(1), does not affect:
(1) other law or legal standards governing predatory
pricing or anticompetitive conduct; or
(2) an infrastructure commitment under Chapter 58 or 59.

Added by Acts 2011, 82nd Leg., R.S., Ch. 98 (S.B. 980), Sec. 20, eff.
January 2, 2012.

Sec. 65.155. COMPLAINT BY AFFECTED PERSON. (a) An affected

person may file a complaint at the commission challenging whether a
transitioning company is complying with Section 65.154(b).
(b) Notwithstanding Section 65.154(a)(2), the commission may
require a transitioning company to submit a long-run incremental cost
study for a business service that is the subject of a complaint
submitted under Subsection (a).

Added by Acts 2011, 82nd Leg., R.S., Ch. 98 (S.B. 980), Sec. 20, eff.
January 2, 2012.

SUBCHAPTER E. REDUCTION OF SWITCHED ACCESS RATES

Sec. 65.201. REDUCTION OF SWITCHED ACCESS RATES BY DEREGULATED
COMPANY. (a) On the date the last market of an incumbent local
exchange company is deregulated, the company shall reduce both the
company's originating and terminating per minute of use switched
access rates in each market to parity with the company's respective
federal originating and terminating per minute of use switched access
rates.
(b) After reducing the rates under Subsection (a), a

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deregulated company shall maintain parity with the company's federal

originating and terminating per minute of use switched access rates.
If the company's federal originating and terminating per minute of
use switched access rates are changed, the company shall change the
company's per minute of use switched access rates in each market as
necessary to re-achieve parity with the company's federal originating
and terminating per minute of use switched access rates.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 26, eff.
September 7, 2005.

Sec. 65.202. REDUCTION OF SWITCHED ACCESS RATES BY

TRANSITIONING COMPANY WITH MORE THAN THREE MILLION ACCESS LINES. (a)
Notwithstanding any other provision of this title, a transitioning
company that has more than three million access lines in service in
this state on January 1, 2006, shall:
(1) on July 1, 2006, reduce both the company's originating
and terminating per minute of use switched access rates in each
market by an amount equal to 33 percent of the difference in the
rates in effect on June 30, 2006, and the company's respective
federal originating and terminating per minute of use switched access
rates;
(2) on July 1, 2007, reduce both the company's originating
and terminating per minute of use switched access rates in each
market by an amount equal to 33 percent of the difference in the
rates in effect on June 30, 2006, and the company's respective
federal originating and terminating per minute of use switched access
rates; and
(3) on July 1, 2008, reduce both the company's originating
and terminating per minute of use switched access rates in each
market to parity with the company's respective federal originating
and terminating per minute of use switched access rates.
(b) After reducing the rates under Subsection (a), a
transitioning company shall maintain parity with the company's
federal originating and terminating per minute of use switched access
rates. If the company's federal originating and terminating per
minute of use switched access rates are changed, the company shall
change the company's per minute of use switched access rates in each
market as necessary to re-achieve parity with the company's federal

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 UTILITIES CODE

originating and terminating per minute of use switched access rates.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 26, eff.
September 7, 2005.

Sec. 65.203. REDUCTION OF SWITCHED ACCESS RATES BY CERTAIN

TRANSITIONING COMPANIES WITH NOT MORE THAN THREE MILLION ACCESS
LINES. (a) Notwithstanding any other provision of this title, a
company that is classified as a transitioning company effective
January 1, 2006, and that has not more than three million access
lines in service in this state on that date shall reduce both the
company's originating and terminating per minute of use switched
access rates in each market in accordance with this section.
(b) On July 1, 2006, the transitioning company shall reduce
both the company's originating and terminating per minute of use
switched access rates in each market by an amount equal to the lesser
of:
(1) 25 percent of the difference in the company's rates in
effect on June 30, 2006, and the company's respective federal
originating and terminating per minute of use switched access rates
in effect on that date; or
(2) an amount derived by multiplying that difference by a
percentage derived by dividing the number of the company's markets
that are not regulated on July 1, 2006, by the total number of the
company's markets on December 30, 2005.
(c) On July 1, 2007, the transitioning company shall reduce
both the company's originating and terminating per minute of use
switched access rates in each market by an amount equal to the lesser
of:
(1) 25 percent of the difference in the company's rates in
effect on June 30, 2006, and the company's respective federal
originating and terminating per minute of use switched access rates
in effect on that date; or
(2) an amount derived by multiplying that difference by a
percentage derived by dividing the number of the company's markets
that were deregulated in the prior 12 months by the total number of
the company's markets on December 30, 2005.
(d) On July 1, 2008, the transitioning company shall reduce
both the company's originating and terminating per minute of use

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switched access rates in each market by an amount equal to the lesser

of:
(1) 25 percent of the difference in the company's rates in
effect on June 30, 2006, and the company's respective federal
originating and terminating per minute of use switched access rates
in effect on that date; or
(2) an amount derived by multiplying that difference by a
percentage derived by dividing the number of the company's markets
that were deregulated in the prior 12 months by the total number of
the company's markets on December 30, 2005.
(e) On July 1, 2009, and each succeeding year thereafter on
July 1, the transitioning company shall reduce both the company's
originating and terminating per minute of use switched access rates
in each market by an amount derived by multiplying the difference in
the company's rates in effect on June 30, 2006, and the company's
respective federal originating and terminating per minute of use
switched access rates in effect on that date by a percentage derived
by dividing the number of the company's markets that were deregulated
in the prior 12 months by the total number of the company's markets
on December 30, 2005, except that a transitioning company shall be
required to reduce both the company's originating and terminating per
minute of use switched access charges to parity with the company's
respective federal originating and terminating per minute of use
switched access charges if more than 75 percent of the transitioning
company's markets are not regulated on July 1 of 2009 or any
succeeding year.
(f) After reducing the rates under Subsection (e), a
transitioning company shall maintain parity with the company's
federal originating and terminating per minute of use switched access
rates. If the company's federal originating and terminating per
minute of use switched access rates are changed, the company shall
change the company's per minute of use switched access rates in each
market as necessary to re-achieve parity with the company's federal
originating and terminating per minute of use switched access rates.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 26, eff.
September 7, 2005.

Sec. 65.204. REDUCTION OF SWITCHED ACCESS RATES BY NEWLY

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DESIGNATED TRANSITIONING COMPANY. (a) Notwithstanding any other

provision of this title, a company that is classified as a
transitioning company after January 1, 2006, shall reduce both the
company's originating and terminating per minute of use switched
access rates in each market in accordance with this section.
(b) On the date the company is classified as a transitioning
company, the company shall reduce both the company's originating and
terminating per minute of use switched access rates in each market by
an amount equal to the lesser of:
(1) 25 percent of the difference in the company's rates in
effect on the day before the date the company was classified, and the
company's respective federal originating and terminating per minute
of use switched access rates in effect on that date; or
(2) an amount derived by multiplying that difference by a
percentage derived by dividing the number of the company's markets
that are not regulated on the date the company is classified as a
transitioning company by the total number of the company's markets on
December 30, 2005.
(c) On the first anniversary of the date the company is
classified as a transitioning company, the company shall reduce both
the company's originating and terminating per minute of use switched
access rates in each market by an amount equal to the lesser of:
(1) 25 percent of the difference in the company's rates in
effect on the day before the date the company was classified, and the
company's respective federal originating and terminating per minute
of use switched access rates in effect on that date; or
(2) an amount derived by multiplying that difference by a
percentage derived by dividing the number of the company's markets
that were deregulated in the prior 12 months by the total number of
the company's markets on December 30, 2005.
(d) On the second anniversary of the date the company is
classified as a transitioning company, the company shall reduce both
the company's originating and terminating per minute of use switched
access rates in each market by an amount equal to the lesser of:
(1) 25 percent of the difference in the company's rates in
effect on the day before the date the company was classified, and the
company's respective federal originating and terminating per minute
of use switched access rates in effect on that date; or
(2) an amount derived by multiplying that difference by a
percentage derived by dividing the number of the company's markets

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that were deregulated in the prior 12 months by the total number of

the company's markets on December 30, 2005.
(e) On the third anniversary of the date the company is
classified as a transitioning company and each anniversary
thereafter, the company shall reduce both the company's originating
and terminating per minute of use switched access rates in each
market by an amount derived by multiplying the difference in the
company's rates in effect on the day before the date the company was
classified as a transitioning company, and the company's respective
federal originating and terminating per minute of use switched access
rates in effect on that date by a percentage derived by dividing the
number of the company's markets that were deregulated in the prior 12
months by the total number of the company's markets on December 30,
2005, except that a transitioning company shall be required to reduce
both the company's originating and terminating per minute of use
switched access charges to parity with the company's respective
federal originating and terminating per minute of use switched access
charges if more than 75 percent of the transitioning company's
markets are not regulated on July 1 of 2009 or any succeeding year.
(f) After reducing the rates under Subsection (e), a
transitioning company shall maintain parity with the company's
federal originating and terminating per minute of use switched access
rates. If the company's federal originating and terminating per
minute of use switched access rates are changed, the company shall
change the company's per minute of use switched access rates in each
market as necessary to re-achieve parity with the company's federal
originating and terminating per minute of use switched access rates.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 26, eff.
September 7, 2005.

Sec. 65.205. MAINTENANCE OF REDUCTION OR PARITY. (a) After a

deregulated or transitioning company reduces the company's rates
under this subchapter, the company may not increase those rates above
the applicable rates prescribed by this subchapter.
(b) If a transitioning company's federal per minute of use
switched access rates are reduced, the company shall reduce the
company's per minute of use switched access rates to not more than
the applicable rates prescribed by this subchapter.

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(c) Notwithstanding Subsections (a) and (b), a deregulated or

transitioning company may decrease the company's per minute of use
switched access rates to amounts that are less than the applicable
rates prescribed by this subchapter.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 26, eff.
September 7, 2005.

CHAPTER 66. STATE-ISSUED CABLE AND VIDEO FRANCHISE

Sec. 66.001. FRANCHISING AUTHORITY. The commission shall be
designated as the franchising authority for a state-issued franchise
for the provision of cable service or video service.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 27, eff.
September 7, 2005.

Sec. 66.002. DEFINITIONS. In this chapter:

(1) "Actual incremental cost" means only current out-of-
pocket expenses for labor, equipment repair, equipment replacement,
and tax expenses directly associated with the labor or the equipment
of a service provider that is necessarily and directly used to
provide what were, under a superseded franchise, in-kind services,
exclusive of any profit or overhead such as depreciation,
amortization, or administrative expense.
(2) "Cable service" is defined as set forth in 47 U.S.C.
Section 522(6).
(3) "Cable service provider" means a person who provides
cable service.
(4) "Communications network" means a component or facility
that is, wholly or partly, physically located within a public right-
of-way and that is used to provide video programming, cable, voice,
or data services.
(5) "Franchise" means an initial authorization, or renewal
of an authorization, issued by a franchising authority, regardless of
whether the authorization is designated as a franchise, permit,
license, resolution, contract, certificate, agreement, or otherwise,
that authorizes the construction and operation of a cable or video
services network in the public rights-of-way.
(6)(A) "Gross revenues" means all consideration of any kind

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or nature including without limitation cash, credits, property, and

in-kind contributions (services or goods) derived by the holder of a
state-issued certificate of franchise authority from the operation of
the cable service provider's or the video service provider's network
to provide cable service or video service within the municipality.
Gross revenue shall include all consideration paid to the holder of a
state-issued certificate of franchise authority and its affiliates
(to the extent either is acting as a provider of a cable service or
video service as authorized by this chapter), which shall include but
not be limited to the following: (i) all fees charged to subscribers
for any and all cable service or video service provided by the holder
of a state-issued certificate of franchise authority; (ii) any fee
imposed on the holder of a state-issued certificate of franchise
authority by this chapter that is passed through and paid by
subscribers (including without limitation the franchise fee set forth
in this chapter); and (iii) compensation received by the holder of a
state-issued certificate of franchise authority or its affiliates
that is derived from the operation of the holder of a state-issued
certificate of franchise authority's network to provide cable service
or video service with respect to commissions that are paid to the
holder of a state-issued certificate of franchise authority as
compensation for promotion or exhibition of any products or services
on the holder of a state-issued certificate of franchise authority's
network, such as a "home shopping" or a similar channel, subject to
Paragraph (B)(v). Gross revenue includes a pro rata portion of all
revenue derived by the holder of a state-issued certificate of
franchise authority or its affiliates pursuant to compensation
arrangements for advertising derived from the operation of the holder
of a state-issued certificate of franchise authority's network to
provide cable service or the video service within a municipality,
subject to Paragraph (B)(iii). The allocation shall be based on the
number of subscribers in the municipality divided by the total number
of subscribers in relation to the relevant regional or national
compensation arrangement. Advertising commissions paid to third
parties shall not be netted against advertising revenue included in
gross revenue. Revenue of an affiliate derived from the affiliate's
provision of cable service or the video service shall be gross
revenue to the extent the treatment of such revenue as revenue of the
affiliate and not of the holder of a state-issued certificate of
franchise authority has the effect (whether intentional or

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unintentional) of evading the payment of fees which would otherwise

be paid to the municipality. In no event shall revenue of an
affiliate be gross revenue to the holder of a state-issued
certificate of franchise authority if such revenue is otherwise
subject to fees to be paid to the municipality.
(B) For purposes of this section, "gross revenues" does
not include:
(i) any revenue not actually received, even if
billed, such as bad debt;
(ii) non-cable services or non-video services
revenues received by any affiliate or any other person in exchange
for supplying goods or services used by the holder of a state-issued
certificate of franchise authority to provide cable service or video
service;
(iii) refunds, rebates, or discounts made to
subscribers, leased access providers, advertisers, or a municipality;
(iv) any revenues from services classified as non-
cable service or non-video service under federal law including
without limitation revenue received from telecommunications services;
revenue received from information services (but not excluding cable
services or video services); and any other revenues attributed by the
holder of a state-issued certificate of franchise authority to non-
cable service or non-video service in accordance with Federal
Communications Commission or commission rules, regulations,
standards, or orders;
(v) any revenue paid by subscribers to home
shopping programmers directly from the sale of merchandise through
any home shopping channel offered as part of the cable services or
video services, but not excluding any commissions that are paid to
the holder of a state-issued certificate of franchise authority as
compensation for promotion or exhibition of any products or services
on the holder of a state-issued certificate of franchise authority's
network, such as a "home shopping" or a similar channel;
(vi) the sale of cable services or video services
for resale in which the purchaser is required to collect this
chapter's fees from the purchaser's customer. Nothing under this
chapter is intended to limit state's rights pursuant to 47 U.S.C.
Section 542(h);
(vii) the provision of cable services or video
services to customers at no charge, as required or allowed by this

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 UTILITIES CODE

chapter, including without limitation the provision of cable services

or video services to public institutions, as required or permitted in
this chapter, including without limitation public schools or
governmental entities, as required or permitted in this chapter;
(viii) any tax of general applicability imposed
upon the holder of a state-issued certificate of franchise authority
or upon subscribers by a city, state, federal, or any other
governmental entity and required to be collected by the holder of a
state-issued certificate of franchise authority and remitted to the
taxing entity (including, but not limited to, sales and use tax,
gross receipts tax, excise tax, utility users tax, public service
tax, communication taxes, and fees not imposed by this chapter);
(ix) any forgone revenue from the holder of a
state-issued certificate of franchise authority's provision of free
or reduced cost cable services or video services to any person
including without limitation employees of the holder of a state-
issued certificate of franchise authority, to the municipality and
other public institutions or other institutions as allowed in this
chapter; provided, however, that any forgone revenue which the holder
of a state-issued certificate of franchise authority chooses not to
receive in exchange for trades, barters, services, or other items of
value shall be included in gross revenue;
(x) sales of capital assets or sales of surplus
equipment that is not used by the purchaser to receive cable services
or video services from the holder of a state-issued certificate of
franchise authority;
(xi) directory or Internet advertising revenue
including, but not limited to, yellow pages, white pages, banner
advertisement, and electronic publishing; and
(xii) reimbursement by programmers of marketing
costs incurred by the holder of a state-issued franchise for the
introduction of new programming that exceed the actual costs.
(C) For purposes of this definition, a provider's
network consists solely of the optical spectrum wavelengths,
bandwidth, or other current or future technological capacity used for
the transmission of video programming over wireline directly to
subscribers within the geographic area within the municipality as
designated by the provider in its franchise.
(7) "Incumbent cable service provider" means the cable
service provider serving the largest number of cable subscribers in a

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particular municipal franchise area on September 1, 2005.

(8) "Public right-of-way" means the area on, below, or
above a public roadway, highway, street, public sidewalk, alley,
waterway, or utility easement in which a municipality has an
interest.
(9) "Video programming" means programming provided by, or
generally considered comparable to programming provided by, a
television broadcast station, as set forth in 47 U.S.C. Section
522(20).
(10) "Video service" means video programming services
provided through wireline facilities located at least in part in the
public right-of-way without regard to delivery technology, including
Internet protocol technology. This definition does not include any
video service provided by a commercial mobile service provider as
defined in 47 U.S.C. Section 332(d).
(11) "Video service provider" means a video programming
distributor that distributes video programming services through
wireline facilities located at least in part in the public right-of-
way without regard to delivery technology. This term does not
include a cable service provider.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 27, eff.
September 7, 2005.

Sec. 66.003. STATE AUTHORIZATION TO PROVIDE CABLE SERVICE OR

VIDEO SERVICE. (a) An entity or person seeking to provide cable
service or video service in this state shall file an application for
a state-issued certificate of franchise authority with the commission
as required by this section. An entity providing cable service or
video service under a franchise agreement with a municipality is not
subject to this subsection with respect to such municipality until
the franchise agreement is terminated under Section 66.004 or until
the franchise agreement expires.
(a-1) The commission shall notify an applicant for a state-
issued certificate of franchise authority whether the applicant's
affidavit described by Subsection (b) is complete before the 15th
business day after the applicant submits the affidavit.
(b) The commission shall issue a certificate of franchise
authority to offer cable service or video service before the 17th

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business day after receipt of a completed affidavit submitted by the

applicant and signed by an officer or general partner of the
applicant affirming:
(1) that the applicant has filed or will timely file with
the Federal Communications Commission all forms required by that
agency in advance of offering cable service or video service in this
state;
(2) that the applicant agrees to comply with all applicable
federal and state statutes and regulations;
(3) that the applicant agrees to comply with all applicable
municipal regulations regarding the use and occupation of public
rights-of-way in the delivery of the cable service or video service,
including the police powers of the municipalities in which the
service is delivered;
(4) a description of the service area footprint to be
served within the municipality, if applicable, otherwise the
municipality to be served by the applicant, which may include certain
designations of unincorporated areas, which description shall be
updated by the applicant prior to the expansion of cable service or
video service to a previously undesignated service area and, upon
such expansion, notice to the commission of the service area to be
served by the applicant; and
(5) the location of the applicant's principal place of
business and the names of the applicant's principal executive
officers.
(c) The certificate of franchise authority issued by the
commission shall contain:
(1) a grant of authority to provide cable service or video
service as requested in the application;
(2) a grant of authority to use and occupy the public
rights-of-way in the delivery of that service, subject to the laws of
this state, including the police powers of the municipalities in
which the service is delivered; and
(3) a statement that the grant of authority is subject to
lawful operation of the cable service or video service by the
applicant or its successor in interest.
(d) The certificate of franchise authority issued by the
commission is fully transferable to any successor in interest to the
applicant to which it is initially granted. A notice of transfer
shall be filed with the commission and the relevant municipality

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 UTILITIES CODE

within 14 business days of the completion of such transfer.

(e) The certificate of franchise authority issued by the
commission may be terminated by the cable service provider or video
service provider by submitting notice to the commission.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 27, eff.
September 7, 2005.
Amended by:
Acts 2011, 82nd Leg., R.S., Ch. 1077 (S.B. 1087), Sec. 1, eff.
September 1, 2011.

Sec. 66.004. ELIGIBILITY FOR COMMISSION-ISSUED FRANCHISE. (a)

A cable service provider or a video service provider that currently
has or had previously received a franchise to provide cable service
or video service with respect to such municipalities is not eligible
to seek a state-issued certificate of franchise authority under this
chapter as to those municipalities until the expiration date of the
existing franchise agreement, except as provided by Subsections (b),
(b-1), (b-2), (b-3), and (c).
(b) Beginning September 1, 2005, a cable service provider or
video service provider that is not the incumbent cable service
provider and serves fewer than 40 percent of the total cable
customers in a particular municipal franchise area may elect to
terminate that municipal franchise and seek a state-issued
certificate of franchise authority by providing written notice to the
commission and the affected municipality before January 1, 2006. The
municipal franchise is terminated on the date the commission issues
the state-issued certificate of franchise authority.
(b-1) Beginning September 1, 2011, a cable service provider or
video service provider in a municipality with a population of less
than 215,000 that was not allowed to or did not terminate a municipal
franchise under Subsection (b) may elect to terminate not less than
all unexpired franchises in municipalities with a population of less
than 215,000 and seek a state-issued certificate of franchise
authority for each area served under a terminated municipal franchise
by providing written notice to the commission and each affected
municipality before January 1, 2012. A municipal franchise is
terminated on the date the commission issues a state-issued
certificate of franchise authority to the provider for the area

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served under that terminated franchise.

(b-2) A cable service provider or video service provider in a
municipality with a population of at least 215,000 may terminate a
municipal franchise in that municipality in the manner described by
Subsection (b-1) if:
(1) the cable service provider or video service provider is
not the incumbent cable service provider in that municipality; and
(2) the incumbent cable service provider received a state-
issued certificate of franchise authority from the commission before
September 1, 2011.
(b-3) A municipality with a population of at least 215,000 may
enter into an agreement with any cable service provider in the
municipality to terminate a municipal cable franchise before the
expiration of the franchise. To the extent that the mutually agreed
on terms and conditions for early termination of the unexpired
municipal cable franchise conflict with a provision of this chapter,
the agreed on terms and conditions control.
(c) A cable service provider that elects under Subsection (b),
(b-1), or (b-2) to terminate an existing municipal franchise is
responsible for remitting to the affected municipality before the
91st day after the date the municipal franchise is terminated any
accrued but unpaid franchise fees due under the terminated franchise.
If the cable service provider has credit remaining from prepaid
franchise fees, the provider may deduct the amount of the remaining
credit from any future fees or taxes it must pay to the municipality,
either directly or through the comptroller.
(d) For purposes of this section, a cable service provider or
video service provider will be deemed to have or have had a franchise
to provide cable service or video service in a specific municipality
if any affiliates or successor entity of the cable or video provider
has or had a franchise agreement granted by that specific
municipality.
(e) The terms "affiliates or successor entity" in this section
shall include but not be limited to any entity receiving, obtaining,
or operating under a municipal cable or video franchise through
merger, sale, assignment, restructuring, or any other type of
transaction.
(f) Except as provided in this chapter, nothing in this chapter
is intended to abrogate, nullify, or adversely affect in any way the
contractual rights, duties, and obligations existing and incurred by

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a cable service provider or a video service provider before the date

a franchise expires or the date a provider terminates a franchise
under Subsection (b-1) or (b-2), as applicable, and owed or owing to
any private person, firm, partnership, corporation, or other entity
including without limitation those obligations measured by and
related to the gross revenue hereafter received by the holder of a
state-issued certificate of franchise authority for services provided
in the geographic area to which such prior franchise or permit
applies. All liens, security interests, royalties, and other
contracts, rights, and interests in effect on September 1, 2005, or
the date a franchise is terminated under Subsection (b-1) or (b-2)
shall continue in full force and effect, without the necessity for
renewal, extension, or continuance, and shall be paid and performed
by the holder of a state-issued certificate of franchise authority,
and shall apply as though the revenue generated by the holder of a
state-issued certificate of franchise authority continued to be
generated pursuant to the permit or franchise issued by the prior
local franchising authority or municipality within the geographic
area to which the prior permit or franchise applies. It shall be a
condition to the issuance and continuance of a state-issued
certificate of franchise authority that the private contractual
rights and obligations herein described continue to be honored, paid,
or performed to the same extent as though the cable service provider
continued to operate under its prior franchise or permit, for the
duration of such state-issued certificate of franchise authority and
any renewals or extensions thereof, and that the applicant so agrees.
Any person, firm, partnership, corporation, or other entity holding
or claiming rights herein reserved may enforce same by an action
brought in a court of competent jurisdiction.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 27, eff.
September 7, 2005.
Amended by:
Acts 2011, 82nd Leg., R.S., Ch. 1077 (S.B. 1087), Sec. 2, eff.
September 1, 2011.

Sec. 66.005. FRANCHISE FEE. (a) The holder of a state-issued

certificate of franchise authority shall pay each municipality in
which it provides cable service or video service a franchise fee of

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five percent based upon the definition of gross revenues as set forth
in this chapter. That same franchise fee structure shall apply to
any unincorporated areas that are annexed by a municipality after the
effective date of the state-issued certificate of franchise
authority.
(b) The franchise fee payable under this section is to be paid
quarterly, within 45 days after the end of the quarter for the
preceding calendar quarter. Each payment shall be accompanied by a
summary explaining the basis for the calculation of the fee. A
municipality may review the business records of the cable service
provider or video service provider to the extent necessary to ensure
compensation in accordance with Subsection (a), provided that the
municipality may only review records that relate to the 48-month
period preceding the date of the last franchise fee payment. Each
party shall bear the party's own costs of the examination. A
municipality may, in the event of a dispute concerning compensation
under this section, bring an action in a court of competent
jurisdiction.
(c) The holder of a state-issued certificate of franchise
authority may recover from the provider's customers any fee imposed
by this chapter.
(d) In this subsection, "affiliated group" has the meaning
assigned by Section 171.0001, Tax Code. A holder of a state-issued
certificate of franchise authority is not subject to the fee imposed
under Subsection (a) for a given calendar year if the holder
determines that the sum of fees due from the holder and any member of
the holder's affiliated group to all municipalities in this state
under Subsection (a) is less than the sum of the compensation due
from the holder and any member of the holder's affiliated group to
all municipalities in this state under Section 283.051, Local
Government Code. The determination under this subsection for a given
year must be based on amounts actually paid, or amounts that would
have been paid notwithstanding this subsection, during the 12-month
period ending June 30 of the immediately preceding calendar year by
the holder and any member of the holder's affiliated group. In the
case of a conflict between this subsection and Section 283.055, Local
Government Code, this subsection prevails.
(e) Notwithstanding the aggregate amount of compensation or
fees paid in this state calculated under Subsection (d), Subsection
(d) does not exempt a holder of a state-issued certificate of

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 UTILITIES CODE

franchise authority from paying the fee imposed under Subsection (a)
to a municipality if the holder is not required to pay compensation
under Section 283.051, Local Government Code, to that municipality.
This subsection applies only to a municipality described in this
subsection and does not limit the application of Subsection (d) to
any other municipality. Nothing in this subsection affects the
application of Section 66.006 or 66.009 to any holder of a state-
issued certificate of franchise authority.
(f) A holder of a state-issued certificate of franchise
authority shall file, not later than October 1 of each year, an
annual written notification with each municipality in which the
holder provides cable or video services of the holder's requirement
to pay the fee under Subsection (a) or exemption from the requirement
to pay the fee under Subsection (d) for the following calendar year.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 27, eff.
September 7, 2005.
Amended by:
Acts 2011, 82nd Leg., R.S., Ch. 1077 (S.B. 1087), Sec. 3, eff.
September 1, 2011.
Acts 2019, 86th Leg., R.S., Ch. 980 (S.B. 1152), Sec. 2, eff.
September 1, 2019.

Sec. 66.006. IN-KIND CONTRIBUTIONS TO MUNICIPALITY. (a) Until

the expiration or termination of the incumbent cable service
provider's agreement, the holder of a state-issued certificate of
franchise authority shall pay a municipality in which it is offering
cable service or video service the same cash payments on a per
subscriber basis as required by the incumbent cable service
provider's franchise agreement. All cable service providers and all
video service providers shall report quarterly to the municipality
the total number of subscribers served within the municipality. The
amount paid by the holder of a state-issued certificate of franchise
authority shall be calculated quarterly by the municipality by
multiplying the amount of cash payment under the incumbent cable
service provider's franchise agreement by a number derived by
dividing the number of subscribers served by a video service provider
or cable service provider by the total number of video or cable
service subscribers in the municipality. Such pro rata payments are

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 UTILITIES CODE

to be paid quarterly to the municipality within 45 days after the end

of the quarter for the preceding calendar quarter.
(b) On the expiration or termination of the incumbent cable
service provider's agreement, the holder of a state-issued
certificate of franchise authority shall pay a municipality in which
it is offering cable service or video service one percent of the
provider's gross revenues, as defined by this chapter, or at the
municipality's election, the per subscriber fee that was paid to the
municipality under the expired or terminated incumbent cable service
provider's agreement, in lieu of in-kind compensation and grants.
Payments under this subsection shall be paid in the same manner as
outlined in Section 66.005(b).
(c) All fees paid to municipalities under this section are paid
in accordance with 47 U.S.C. Sections 531 and 541(a)(4)(B) and may be
used by the municipality as allowed by federal law; further, these
payments are not chargeable as a credit against the franchise fee
payments authorized under this chapter.
(c-1) The holder of a state-issued certificate of franchise
authority shall include with a fee paid to a municipality under this
section a statement identifying the fee.
(c-2) A municipality that receives fees under this section:
(1) shall maintain revenue from the fees in a separate
account established for that purpose;
(2) may not commingle revenue from the fees with any other
money;
(3) shall maintain a record of each deposit to and
disbursement from the separate account, including a record of the
payee and purpose of each disbursement; and
(4) may not spend revenue from the fees except directly
from the separate account.
(d) The following services shall continue to be provided by the
cable provider that was furnishing services pursuant to its municipal
cable franchise until the expiration or termination of the franchise
and thereafter as provided in Subdivisions (1) and (2) below:
(1) institutional network capacity, however defined or
referred to in the municipal cable franchise but generally referring
to a private line data network capacity for use by the municipality
for noncommercial purposes, shall continue to be provided at the same
capacity as was provided to the municipality prior to the date of
expiration or termination, provided that the municipality will

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compensate the provider for the actual incremental cost of the

capacity; and
(2) cable services to community public buildings, such as
municipal buildings and public schools, shall continue to be provided
to the same extent provided immediately prior to the date of the
termination. On the expiration or termination of the franchise
agreement, a provider that provides the services may deduct from the
franchise fee to be paid to the municipality an amount equal to the
actual incremental cost of the services if the municipality requires
the services after that date. Such cable service generally refers to
the existing cable drop connections to such facilities and the tier
of cable service provided pursuant to the franchise at the time of
the expiration or termination.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 27, eff.
September 7, 2005.
Amended by:
Acts 2011, 82nd Leg., R.S., Ch. 1077 (S.B. 1087), Sec. 4, eff.
September 1, 2011.

Sec. 66.007. BUILD-OUT. The holder of a state-issued

certificate of franchise authority shall not be required to comply
with mandatory build-out provisions.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 27, eff.
September 7, 2005.

Sec. 66.008. CUSTOMER SERVICE STANDARDS. The holder of a

state-issued certificate of franchise authority shall comply with
customer service requirements consistent with 47 C.F.R. Section
76.309(c) until there are two or more providers offering service,
excluding direct-to-home satellite service, in the relevant
municipality.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 27, eff.
September 7, 2005.

Sec. 66.009. PUBLIC, EDUCATIONAL, AND GOVERNMENTAL ACCESS

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CHANNELS. (a) Not later than 120 days after a request by a

municipality, the holder of a state-issued certificate of franchise
authority shall provide the municipality with capacity in its
communications network to allow public, educational, and governmental
(PEG) access channels for noncommercial programming.
(b) The holder of a state-issued certificate of franchise
authority shall provide no fewer than the number of PEG access
channels a municipality has activated under the incumbent cable
service provider's franchise agreement as of September 1, 2005.
(c) If a municipality did not have the maximum number of PEG
access channels as of September 1, 2005, as provided by Subdivisions
(1) and (2) based on the municipality's population on that date, the
cable service provider or video service provider shall furnish at the
request of the municipality:
(1) up to three PEG channels for a municipality with a
population of at least 50,000; and
(2) up to two PEG channels for a municipality with a
population of less than 50,000.
(d) Any PEG channel provided pursuant to this section that is
not utilized by the municipality for at least eight hours a day shall
no longer be made available to the municipality, but may be
programmed at the cable service provider's or video service
provider's discretion. At such time as the municipality can certify
to the cable service provider or video service provider a schedule
for at least eight hours of daily programming, the cable service
provider or video service provider shall restore the previously lost
channel but shall be under no obligation to carry that channel on a
basic or analog tier.
(e) In the event a municipality has not utilized the minimum
number of access channels as permitted by Subsection (c), access to
the additional channel capacity allowed in Subsection (c) shall be
provided upon 90 days' written notice if the municipality meets the
following standard: if a municipality has one active PEG channel and
wishes to activate an additional PEG channel, the initial channel
shall be considered to be substantially utilized when 12 hours are
programmed on that channel each calendar day. In addition, at least
40 percent of the 12 hours of programming for each business day on
average over each calendar quarter must be nonrepeat programming.
Nonrepeat programming shall include the first three video-castings of
a program. If a municipality is entitled to three PEG channels under

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Subsection (c) and has in service two active PEG channels, each of
the two active channels shall be considered to be substantially
utilized when 12 hours are programmed on each channel each calendar
day and at least 50 percent of the 12 hours of programming for each
business day on average over each calendar quarter is nonrepeat
programming for three consecutive calendar quarters.
(f) The operation of any PEG access channel provided pursuant
to this section shall be the responsibility of the municipality
receiving the benefit of such channel, and the holder of a state-
issued certificate of franchise authority bears only the
responsibility for the transmission of such channel. The holder of a
state-issued certificate of franchise authority shall be responsible
for providing the connectivity to each PEG access channel
distribution point up to the first 200 feet.
(g) The municipality must ensure that all transmissions,
content, or programming to be transmitted over a channel or facility
by a holder of a state-issued certificate of franchise authority are
provided or submitted to the cable service provider or video service
provider in a manner or form that is capable of being accepted and
transmitted by a provider, without requirement for additional
alteration or change in the content by the provider, over the
particular network of the cable service provider or video service
provider, which is compatible with the technology or protocol
utilized by the cable service provider or video service provider to
deliver services.
(h) Where technically feasible, the holder of a state-issued
certificate of franchise authority that is not an incumbent cable
service provider and an incumbent cable service provider, including
an incumbent cable service provider that holds a state-issued
certificate of franchise authority issued under Section 66.004(b-1),
shall use reasonable efforts to interconnect their cable or video
systems for the purpose of providing PEG programming.
Interconnection may be accomplished by direct cable, microwave link,
satellite, or other reasonable method of connection. The holder of a
state-issued certificate of franchise authority and the incumbent
cable service provider shall negotiate in good faith, and the
incumbent cable service provider may not withhold interconnection of
PEG channels.
(i) A court of competent jurisdiction shall have exclusive
jurisdiction to enforce any requirement under this section.

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Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 27, eff.
September 7, 2005.
Amended by:
Acts 2011, 82nd Leg., R.S., Ch. 1077 (S.B. 1087), Sec. 5, eff.
September 1, 2011.

Sec. 66.010. NONDISCRIMINATION BY MUNICIPALITY. (a) A

municipality shall allow the holder of a state-issued certificate of
franchise authority to install, construct, and maintain a
communications network within a public right-of-way and shall provide
the holder of a state-issued certificate of franchise authority with
open, comparable, nondiscriminatory, and competitively neutral access
to the public right-of-way. All use of a public right-of-way by the
holder of a state-issued certificate of franchise authority is
nonexclusive and subject to Section 66.011.
(b) A municipality may not discriminate against the holder of a
state-issued certificate of franchise authority regarding:
(1) the authorization or placement of a communications
network in a public right-of-way;
(2) access to a building; or
(3) a municipal utility pole attachment term.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 27, eff.
September 7, 2005.

Sec. 66.011. MUNICIPAL POLICE POWER; OTHER AUTHORITY. (a) A

municipality may enforce police power-based regulations in the
management of a public right-of-way that apply to the holder of a
state-issued certificate of franchise authority within the
municipality. A municipality may enforce police power-based
regulations in the management of the activities of the holder of a
state-issued certificate of franchise authority to the extent that
they are reasonably necessary to protect the health, safety, and
welfare of the public. Police power-based regulation of the holder
of a state-issued certificate of franchise authority's use of the
public right-of-way must be competitively neutral and may not be
unreasonable or discriminatory. A municipality may not impose on
activities of the holder of a state-issued certificate of franchise

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authority a requirement:
(1) that particular business offices be located in the
municipality;
(2) regarding the filing of reports and documents with the
municipality that are not required by state or federal law and that
are not related to the use of the public right-of-way except that a
municipality may request maps and records maintained in the ordinary
course of business for purposes of locating the portions of a
communications network that occupy public rights-of-way. Any maps or
records of the location of a communications network received by a
municipality shall be confidential and exempt from disclosure under
Chapter 552, Government Code, and may be used by a municipality only
for the purpose of planning and managing construction activity in the
public right-of-way. A municipality may not request information
concerning the capacity or technical configuration of the holder of a
state-issued certificate of franchise authority's facilities;
(3) for the inspection of the holder of a state-issued
certificate of franchise authority's business records except to
extent permitted under Section 66.005(b);
(4) for the approval of transfers of ownership or control
of the holder of a state-issued certificate of franchise authority's
business, except that a municipality may require that the holder of a
state-issued certificate of franchise authority maintain a current
point of contact and provide notice of a transfer within a reasonable
time; or
(5) that the holder of a state-issued certificate of
franchise authority that is self-insured under the provisions of
state law obtain insurance or bonding for any activities within the
municipality, except that a self-insured provider shall provide
substantially the same defense and claims processing as an insured
provider. A bond may not be required from a provider for any work
consisting of aerial construction except that a reasonable bond may
be required of a provider that cannot demonstrate a record of at
least four years' performance of work in any municipal public right-
of-way free of currently unsatisfied claims by a municipality for
damage to the right-of-way.
(b) Notwithstanding any other law, a municipality may require
the issuance of a construction permit, without cost, to the holder of
a state-issued certificate of franchise authority that is locating
facilities in or on a public right-of-way in the municipality. The

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terms of the permit shall be consistent with construction permits

issued to other persons excavating in a public right-of-way.
(c) In the exercise of its lawful regulatory authority, a
municipality shall promptly process all valid and administratively
complete applications of the holder of a state-issued certificate of
franchise authority for a permit, license, or consent to excavate,
set poles, locate lines, construct facilities, make repairs, affect
traffic flow, or obtain zoning or subdivision regulation approvals or
other similar approvals. A municipality shall make every reasonable
effort not to delay or unduly burden the provider in the timely
conduct of the provider's business.
(d) If there is an emergency necessitating response work or
repair, the holder of a state-issued certificate of franchise
authority may begin the repair or emergency response work or take any
action required under the circumstances without prior approval from
the affected municipality, if the holder of a state-issued
certificate of franchise authority notifies the municipality as
promptly as possible after beginning the work and later obtains any
approval required by a municipal ordinance applicable to emergency
response work.
(e) The commission shall have no jurisdiction to review such
police power-based regulations and ordinances adopted by a
municipality to manage the public rights-of-way.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 27, eff.
September 7, 2005.

Sec. 66.012. INDEMNITY IN CONNECTION WITH RIGHT-OF-WAY; NOTICE

OF LIABILITY. (a) The holder of a state-issued certificate of
franchise authority shall indemnify and hold a municipality and its
officers and employees harmless against any and all claims, lawsuits,
judgments, costs, liens, losses, expenses, fees (including reasonable
attorney's fees and costs of defense), proceedings, actions, demands,
causes of action, liability, and suits of any kind and nature,
including personal or bodily injury (including death), property
damage, or other harm for which recovery of damages is sought, that
is found by a court of competent jurisdiction to be caused solely by
the negligent act, error, or omission of the holder of a state-issued
certificate of franchise authority or any agent, officer, director,

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representative, employee, affiliate, or subcontractor of the holder

of a state-issued certificate of franchise authority or their
respective officers, agents, employees, directors, or
representatives, while installing, repairing, or maintaining
facilities in a public right-of-way. The indemnity provided by this
subsection does not apply to any liability resulting from the
negligence of the municipality or its officers, employees,
contractors, or subcontractors. If the holder of a state-issued
certificate of franchise authority and the municipality are found
jointly liable by a court of competent jurisdiction, liability shall
be apportioned comparatively in accordance with the laws of this
state without, however, waiving any governmental immunity available
to the municipality under state law and without waiving any defenses
of the parties under state law. This subsection is solely for the
benefit of the municipality and the holder of a state-issued
certificate of franchise authority and does not create or grant any
rights, contractual or otherwise, for or to any other person or
entity.
(b) The holder of a state-issued certificate of franchise
authority and a municipality shall promptly advise the other in
writing of any known claim or demand against the holder of a state-
issued certificate of franchise authority or the municipality related
to or arising out of the holder of a state-issued certificate of
franchise authority's activities in a public right-of-way.
(c) The commission shall have no jurisdiction to review such
police power-based regulations and ordinances adopted by a
municipality to manage the public rights-of-way.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 27, eff.
September 7, 2005.

Sec. 66.013. MUNICIPAL AUTHORITY. In addition to a

municipality's authority to exercise its nondiscriminatory police
power with respect to public rights-of-way under current law, a
municipality's authority to regulate the holder of state-issued
certificate of franchise authority is limited to:
(1) a requirement that the holder of a state-issued
certificate of franchise authority who is providing cable service or
video service within the municipality register with the municipality

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and maintain a point of contact;

(2) the establishment of reasonable guidelines regarding
the use of public, educational, and governmental access channels; and
(3) submitting reports within 30 days on the customer
service standards referenced in Section 66.008 if the provider is
subject to those standards and has continued and unresolved customer
service complaints indicating a clear failure on the part of the
holder of a state-issued certificate of franchise authority to comply
with the standards.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 27, eff.
September 7, 2005.

Sec. 66.014. DISCRIMINATION PROHIBITED. (a) The purpose of

this section is to prevent discrimination among potential residential
subscribers.
(b) A cable service provider or video service provider that has
been granted a state-issued certificate of franchise authority may
not deny access to service to any group of potential residential
subscribers because of the income of the residents in the local area
in which such group resides.
(c) An affected person may seek enforcement of the requirements
described by Subsection (b) by initiating a proceeding with the
commission. A municipality within which the potential residential
cable service or video service subscribers referenced in Subsection
(b) may be considered an affected person for purposes of this
section.
(d) The holder of a state-issued certificate of franchise
authority shall have a reasonable period of time to become capable of
providing cable service or video service to all households within the
designated franchise area as defined in Section 66.003(b)(4) and may
satisfy the requirements of this section through the use of an
alternative technology that provides comparable content, service, and
functionality.
(e) Notwithstanding any provision of this chapter, the
commission has the authority to make the determination regarding the
comparability of the technology and the service provided.
Notwithstanding any provision of this chapter, the commission has the
authority to monitor the deployment of cable services, video

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services, or alternate technology.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 27, eff.
September 7, 2005.

Sec. 66.015. COMPLIANCE. (a) Should the holder of a state-

issued certificate of franchise authority be found by a court of
competent jurisdiction to be in noncompliance with the requirements
of this chapter, the court shall order the holder a state-issued
certificate of franchise authority, within a specified reasonable
period of time, to cure such noncompliance. Failure to comply shall
subject the holder of the state-issued franchise of franchise
authority to penalties as the court shall reasonably impose, up to
and including revocation of the state-issued certificate of franchise
authority granted under this chapter.
(b) A municipality within which the provider offers cable
service or video service shall be an appropriate party in any such
litigation.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 27, eff.
September 7, 2005.

Sec. 66.016. APPLICABILITY OF OTHER LAWS. (a) Nothing in this

chapter shall be interpreted to prevent a voice provider, cable
service provider or video service provider, or municipality from
seeking clarification of its rights and obligations under federal law
or to exercise any right or authority under federal or state law.
(b) Nothing in this chapter shall limit the ability of a
municipality under existing law to receive compensation for use of
the public rights-of-way from entities determined not to be subject
to all or part of this chapter, including but not limited to provider
of Internet protocol cable or video services, unless such payments
are expressly prohibited by federal law.

Added by Acts 2005, 79th Leg., 2nd C.S., Ch. 2 (S.B. 5), Sec. 27, eff.
September 7, 2005.

TITLE 3. GAS REGULATION

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SUBTITLE A. GAS UTILITY REGULATORY ACT

CHAPTER 101. GENERAL PROVISIONS AND OFFICE OF PUBLIC UTILITY COUNSEL
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 101.001. SHORT TITLE. This subtitle may be cited as the
Gas Utility Regulatory Act.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 101.002. PURPOSE AND FINDINGS. (a) This subtitle is

enacted to protect the public interest inherent in the rates and
services of gas utilities. The purpose of this subtitle is to
establish a comprehensive and adequate regulatory system for gas
utilities to assure rates, operations, and services that are just and
reasonable to the consumers and to the utilities.
(b) Gas utilities are by definition monopolies in the areas
they serve. As a result, the normal forces of competition that
regulate prices in a free enterprise society do not operate. Public
agencies regulate utility rates, operations, and services as a
substitute for competition.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 101.003. DEFINITIONS. In this subtitle:

(1) "Affected person" means:
(A) a gas utility affected by an action of a regulatory
authority;
(B) a person whose utility service or rates are
affected by a proceeding before a regulatory authority; or
(C) a person who:
(i) is a competitor of a gas utility with respect
to a service performed by the utility; or
(ii) wants to enter into competition with a gas
utility.
(2) "Affiliate" means:
(A) a person who directly or indirectly owns or holds
at least five percent of the voting securities of a gas utility;
(B) a person in a chain of successive ownership of at
least five percent of the voting securities of a gas utility;
(C) a corporation that has at least five percent of its

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voting securities owned or controlled, directly or indirectly, by a

gas utility;
(D) a corporation that has at least five percent of its
voting securities owned or controlled, directly or indirectly, by:
(i) a person who directly or indirectly owns or
controls at least five percent of the voting securities of a gas
utility; or
(ii) a person in a chain of successive ownership of
at least five percent of the voting securities of a gas utility;
(E) a person who is an officer or director of a gas
utility or of a corporation in a chain of successive ownership of at
least five percent of the voting securities of a gas utility; or
(F) a person determined to be an affiliate under
Section 101.004.
(3) "Allocation" means the division among municipalities or
among municipalities and unincorporated areas of the plant, revenues,
expenses, taxes, and reserves of a gas utility used to provide gas
utility service in a municipality or for a municipality and
unincorporated areas.
(4) "Corporation" means a domestic or foreign corporation,
joint-stock company, or association, and each lessee, assignee,
trustee, receiver, or other successor in interest of the corporation,
company, or association, that has any of the powers or privileges of
a corporation not possessed by an individual or partnership. The
term does not include a municipal corporation, except as expressly
provided by this subtitle.
(5) "Counsellor" means the chief executive of the Office of
Public Utility Counsel.
(6) "Facilities" means all of the plant and equipment of a
gas utility and includes the tangible and intangible property,
without limitation, owned, operated, leased, licensed, used,
controlled, or supplied for, by, or in connection with the business
of the gas utility.
(7) "Gas utility" includes a person or river authority that
owns or operates for compensation in this state equipment or
facilities to transmit or distribute combustible hydrocarbon natural
gas or synthetic natural gas for sale or resale in a manner not
subject to the jurisdiction of the Federal Energy Regulatory
Commission under the Natural Gas Act (15 U.S.C. Section 717 et seq.).
The term includes a lessee, trustee, or receiver of a gas utility.

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The term does not include:

(A) a municipal corporation;
(B) a person or river authority to the extent the
person or river authority:
(i) produces, gathers, transports, or sells natural
gas or synthetic natural gas under Section 121.004 or 121.005;
(ii) distributes or sells liquefied petroleum gas;
or
(iii) transports, delivers, or sells natural gas
for fuel for irrigation wells or any other direct agricultural use;
(C) a person to the extent the person:
(i) sells natural gas for use as vehicle fuel;
(ii) sells natural gas to a person who later sells
the natural gas for use as vehicle fuel; or
(iii) owns or operates equipment or facilities to
sell or transport natural gas for ultimate use as vehicle fuel;
(D) a person not otherwise a gas utility who furnishes
gas or gas service only to itself, its employees, or its tenants as
an incident of employment or tenancy, if the gas or gas service is
not resold to or used by others;
(E) a person excluded from being considered a gas
utility under Section 121.007; or
(F) an electric cooperative, as that term is defined by
Section 11.003, or its subsidiary, that is excluded from regulation
as a gas utility by Section 121.008.
(8) "Municipally owned utility" means a utility owned,
operated, and controlled by a municipality or by a nonprofit
corporation the directors of which are appointed by one or more
municipalities.
(9) "Order" means all or a part of a final disposition by a
regulatory authority in a matter other than rulemaking, without
regard to whether the disposition is affirmative or negative or
injunctive or declaratory. The term includes the setting of a rate.
(10) "Person" includes an individual, a partnership of two
or more persons having a joint or common interest, a mutual or
cooperative association, a limited liability company, and a
corporation.
(11) "Proceeding" means a hearing, investigation, inquiry,
or other procedure for finding facts or making a decision under this
subtitle. The term includes a denial of relief or dismissal of a

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complaint.
(12) "Rate" means:
(A) any compensation, tariff, charge, fare, toll,
rental, or classification that is directly or indirectly demanded,
observed, charged, or collected by a gas utility for a service,
product, or commodity described in the definition of gas utility in
this section; and
(B) a rule, regulation, practice, or contract affecting
the compensation, tariff, charge, fare, toll, rental, or
classification.
(13) "Regulatory authority" means either the railroad
commission or the governing body of a municipality, in accordance
with the context.
(14) "Service" has its broadest and most inclusive meaning.
The term includes any act performed, anything supplied, and any
facilities used or supplied by a gas utility in the performance of
the utility's duties under this subtitle to its patrons, employees,
other gas utilities, and the public. The term also includes the
interchange of facilities between two or more gas utilities.
(15) "State agency" has the meaning assigned by Section
572.002, Government Code, to the extent the state agency must obtain
the approval described by Section 31.401(a), Natural Resources Code.
(16) "Test year" means the most recent 12 months, beginning
on the first day of a calendar or fiscal year quarter, for which
operating data for a gas utility are available.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 11, Sec. 1, eff. May 3, 1999.
Amended by:
Acts 2007, 80th Leg., R.S., Ch. 709 (H.B. 2174), Sec. 1, eff.
June 15, 2007.
Acts 2011, 82nd Leg., R.S., Ch. 4 (S.B. 312), Sec. 1, eff. April
21, 2011.

Sec. 101.004. PERSON DETERMINED TO BE AFFILIATE. (a) The

railroad commission may determine that a person is an affiliate for
purposes of this subtitle if the railroad commission after notice and
hearing finds that the person:
(1) actually exercises substantial influence or control

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over the policies and actions of a gas utility;

(2) is a person over which a gas utility exercises the
control described by Subdivision (1);
(3) is under common control with a gas utility; or
(4) actually exercises substantial influence over the
policies and actions of a gas utility in conjunction with one or more
persons with whom the person is related by ownership or blood
relationship, or by action in concert, that together they are
affiliated with the gas utility within the meaning of this section
even though neither person may qualify as an affiliate individually.
(b) For purposes of Subsection (a)(3), "common control with a
gas utility" means the direct or indirect possession of the power to
direct or cause the direction of the management and policies of
another, without regard to whether that power is established through
ownership or voting of securities or by any other direct or indirect
means.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 101.005. ADMINISTRATIVE PROCEDURE. Chapter 2001,

Government Code, applies to a proceeding under this subtitle except
to the extent inconsistent with this subtitle.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 101.006. CUMULATIVE EFFECT; APPLICATION TO GAS UTILITIES.

(a) This subtitle is cumulative of laws existing on September 1,
1983, relating to the jurisdiction, power, or authority of the
railroad commission over a gas utility, and, except as specifically
in conflict with this subtitle, that jurisdiction, power, and
authority are not limited by this subtitle.
(b) This subtitle applies to all gas utilities, including a gas
utility that is under the jurisdiction, power, or authority of the
railroad commission in accordance with a law other than this
subtitle.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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Sec. 101.007. LIBERAL CONSTRUCTION. This subtitle shall be

construed liberally to promote the effectiveness and efficiency of
regulation of gas utilities to the extent that this construction
preserves the validity of this subtitle and its provisions.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 101.008. CONSTRUCTION WITH FEDERAL AUTHORITY. This

subtitle shall be construed to apply so as not to conflict with any
authority of the United States.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 101.009. STATE AUTHORITY TO SELL OR CONVEY NATURAL GAS.

(a) In this section:
(1) "Commissioner" means the commissioner of the General
Land Office.
(2) "Public retail customer" means a retail customer that
is an agency of this state, a state institution of higher education,
a public school district, a political subdivision of this state, a
military installation of the United States, or a United States
Department of Veterans Affairs facility.
(b) The commissioner, acting on behalf of the state, may sell
or otherwise convey natural gas generated from royalties taken in
kind as provided by Sections 52.133(f), 53.026, and 53.077, Natural
Resources Code, directly to a public retail customer.
(c) To ensure that the state receives the maximum benefit from
the sale of natural gas generated from royalties taken in kind, the
commissioner shall use all feasible means to sell that natural gas
first to public retail customers that are military installations of
the United States, agencies of this state, institutions of higher
education, or public school districts. The remainder of the natural
gas, if any, may be sold to public retail customers that are
political subdivisions of this state or to a United States Department
of Veterans Affairs facility.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 22, eff. Sept. 1, 1999.
Amended by Acts 2003, 78th Leg., ch. 149, Sec. 20, eff. May 27, 2003.
Transferred, redesignated and amended from Utilities Code, Section

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35.102 by Acts 2019, 86th Leg., R.S., Ch. 53 (H.B. 2263), Sec. 5, eff.
May 17, 2019.

SUBCHAPTER B. OFFICE OF PUBLIC UTILITY COUNSEL

Sec. 101.051. OFFICE OF PUBLIC UTILITY COUNSEL. The
independent office of public utility counsel represents the interests
of residential consumers.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 101.052. OFFICE POWERS AND DUTIES. (a) The office:

(1) may appear or intervene as a party or otherwise
represent residential consumers, as a class, in appeals to the
railroad commission only at the written request of an affected
municipality's governing body;
(2) may initiate or intervene as a matter of right or
otherwise appear in a judicial proceeding that involves an action
taken by the railroad commission in a proceeding in which the office
was a party;
(3) is entitled to the same access as a party, other than
railroad commission staff, to records gathered by the railroad
commission under Section 102.203;
(4) is entitled to discovery of any nonprivileged matter
that is relevant to the subject matter of a proceeding or petition
before the railroad commission;
(5) may represent an individual residential consumer with
respect to the consumer's disputed complaint concerning utility
services that is unresolved before the railroad commission; and
(6) may recommend legislation to the legislature that the
office determines would positively affect the interests of
residential consumers.
(b) The office may represent only as a class the residential
consumers of a municipality that makes a request under Subsection
(a)(1).
(c) This section does not limit the authority of the railroad
commission to represent residential consumers.
(d) The appearance of the counsellor in a proceeding does not
preclude the appearance of other parties on behalf of residential

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consumers. The counsellor may not be grouped with any other party.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 101.053. PROHIBITED ACTS. (a) The counsellor may not:

(1) have a direct or indirect interest in a gas utility
company regulated under this subtitle; or
(2) provide legal services directly or indirectly to or be
employed in any capacity by a gas utility company regulated under
this subtitle, its parent, or its subsidiary companies, corporations,
or cooperatives.
(b) The prohibition under Subsection (a) applies during the
period of the counsellor's service and until the first anniversary of
the date the counsellor ceases to serve as counsellor.
(c) This section does not prohibit a person from otherwise
engaging in the private practice of law after the person ceases to
serve as counsellor.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 101.054. PERSONNEL. (a) The counsellor may employ

lawyers, economists, engineers, consultants, statisticians,
accountants, clerical staff, and other employees as the counsellor
determines necessary to carry out this subchapter.
(b) An employee receives compensation as prescribed by the
legislature from the assessment imposed by Subchapter A, Chapter 16.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

CHAPTER 102. JURISDICTION AND POWERS OF RAILROAD COMMISSION AND OTHER

REGULATORY AUTHORITIES
SUBCHAPTER A. GENERAL POWERS OF RAILROAD COMMISSION
Sec. 102.001. RAILROAD COMMISSION JURISDICTION. (a) The
railroad commission has exclusive original jurisdiction over the
rates and services of a gas utility:
(1) that distributes natural gas or synthetic natural gas
in:
(A) areas outside a municipality; and

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(B) areas inside a municipality that surrenders its

jurisdiction to the railroad commission under Section 103.003; and
(2) that transmits, transports, delivers, or sells natural
gas or synthetic natural gas to a gas utility that distributes the
gas to the public.
(b) The railroad commission has exclusive appellate
jurisdiction to review an order or ordinance of a municipality
exercising exclusive original jurisdiction as provided by this
subtitle.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 2001, 77th Leg., ch. 1233, Sec. 63, eff. Sept. 1, 2001.

Sec. 102.002. LIMITATION ON RAILROAD COMMISSION JURISDICTION.

Except as otherwise provided by this subtitle, this subtitle does not
authorize the railroad commission to:
(1) regulate or supervise a rate or service of a
municipally owned utility; or
(2) affect the jurisdiction, power, or duty of a
municipality that has elected to regulate and supervise a gas utility
in the municipality.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 102.003. RAILROAD COMMISSION POWERS RELATING TO REPORTS.

The railroad commission may:
(1) require a gas utility to report to the railroad
commission information relating to the gas utility and an affiliate
inside or outside this state as useful in administering this
subtitle;
(2) establish the form for a report;
(3) determine the time for a report and the frequency with
which the report is to be made;
(4) require that a report be made under oath;
(5) require the filing with the railroad commission of a
copy of:
(A) a contract or arrangement between a gas utility and
an affiliate;
(B) a report filed with a federal agency or a

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 UTILITIES CODE

governmental agency or body of another state; and

(C) an annual report that shows each payment of
compensation, other than salary or wages subject to federal income
tax withholding:
(i) to residents of this state;
(ii) with respect to legal, administrative, or
legislative matters in this state; or
(iii) for representation before the legislature of
this state or any governmental agency or body; and
(6) require that a contract or arrangement described by
Subdivision (5)(A) that is not in writing be reduced to writing and
filed with the railroad commission.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 102.004. REPORT OF SUBSTANTIAL INTEREST. The railroad

commission may require disclosure of the identity and respective
interests of each owner of at least one percent of the voting
securities of a gas utility or its affiliate.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 102.005. ASSISTANCE TO MUNICIPALITY. On request of a

municipality, the railroad commission may advise and assist the
municipality with respect to a question or proceeding arising under
this subtitle. Assistance provided by the railroad commission may
include aid to a municipality on a matter pending before the railroad
commission, a court, or the municipality's governing body, such as
making a staff member available as a witness or otherwise providing
evidence.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 102.006. ADMINISTRATIVE HEARINGS IN CONTESTED CASES. (a)

The railroad commission by rule shall provide for administrative
hearings in contested cases to be conducted by one or more members of
the railroad commission, by railroad commission hearings examiners,
or by the State Office of Administrative Hearings. The rules must

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provide for a railroad commission hearings examiner or the State

Office of Administrative Hearings to conduct each hearing in a
contested case that is not conducted by one or more members of the
railroad commission. A hearing must be conducted in accordance with
the rules and procedures adopted by the railroad commission.
(b) The railroad commission may delegate to a railroad
commission hearings examiner or to the State Office of Administrative
Hearings the authority to make a final decision and to issue findings
of fact, conclusions of law, and other necessary orders in a
proceeding in which there is not a contested issue of fact or law.
(c) The railroad commission by rule shall define the procedures
by which it delegates final decision-making authority under
Subsection (b) to a railroad commission hearings examiner or to the
State Office of Administrative Hearings.
(d) For purposes of judicial review, the final decision of a
railroad commission hearings examiner or an administrative law judge
of the State Office of Administrative Hearings in a matter delegated
under Subsection (b) has the same effect as a final decision of the
railroad commission unless a member of the commission requests formal
review of the decision.
(e) The State Office of Administrative Hearings shall charge
the railroad commission a fixed annual rate for hearings conducted by
the office under this section only if the legislature appropriates
money for that purpose. If the legislature does not appropriate
money for the payment of a fixed annual rate under this section, the
State Office of Administrative Hearings shall charge the railroad
commission an hourly rate set by the office under Section
2003.024(a), Government Code, for hearings conducted by the office
under this section.

Added by Acts 2001, 77th Leg., ch. 1233, Sec. 64, eff. Sept. 1, 2001.
Amended by Acts 2003, 78th Leg., ch. 200, Sec. 3, eff. Sept. 1, 2003.
Amended by:
Acts 2015, 84th Leg., R.S., Ch. 228 (H.B. 2154), Sec. 25, eff.
September 1, 2015.

SUBCHAPTER B. RESTRICTIONS ON CERTAIN TRANSACTIONS

Sec. 102.051. REPORT OF CERTAIN TRANSACTIONS; RAILROAD
COMMISSION CONSIDERATION. (a) Not later than the 60th day after the

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date the transaction takes effect, a gas utility shall report to the
railroad commission:
(1) a sale, acquisition, or lease of a plant as an
operating unit or system in this state for a total consideration of
more than $1 million; or
(2) a merger or consolidation with another gas utility
operating in this state.
(b) On the filing of a report with the railroad commission, the
railroad commission shall investigate the transaction described by
Subsection (a), with or without a public hearing, to determine
whether the action is consistent with the public interest. In
reaching its determination, the railroad commission shall consider
the reasonable value of the property, facilities, or securities to be
acquired, disposed of, merged, or consolidated.
(c) If the railroad commission finds that a transaction is not
in the public interest, the railroad commission shall take the effect
of the transaction into consideration in ratemaking proceedings and
disallow the effect of the transaction if the transaction will
unreasonably affect rates or service.
(d) This section does not apply to:
(1) the purchase of a unit of property for replacement; or
(2) an addition to the facilities of a gas utility by
construction.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 32, Sec. 1, eff. Sept. 1, 1999.
Amended by:
Acts 2005, 79th Leg., Ch. 1000 (H.B. 474), Sec. 1, eff. September
1, 2005.

Sec. 102.052. REPORT OF PURCHASE OF VOTING STOCK IN GAS

UTILITY. A gas utility may not purchase voting stock in another gas
utility doing business in this state unless the utility reports the
purchase to the railroad commission.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 102.053. REPORT OF LOAN TO STOCKHOLDERS. A gas utility

may not loan money, stocks, bonds, notes, or other evidence of

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indebtedness to a person who directly or indirectly owns or holds any

stock of the gas utility unless the gas utility reports the
transaction to the railroad commission within a reasonable time.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER C. RECORDS
Sec. 102.101. RECORDS OF GAS UTILITY. (a) Each gas utility
shall keep and provide to the regulatory authority, in the manner and
form prescribed by the railroad commission, uniform accounts of all
business transacted by the gas utility.
(b) The railroad commission may prescribe the form of books,
accounts, records, and memoranda to be kept by a gas utility,
including:
(1) the books, accounts, records, and memoranda of:
(A) the provision of and capacity for service; and
(B) the receipt and expenditure of money; and
(2) any other form, record, and memorandum that the
railroad commission considers necessary to carry out this subtitle.
(c) For a gas utility subject to regulation by a federal
regulatory agency, compliance with the system of accounts prescribed
for the particular class of utilities by the federal agency may be
considered sufficient compliance with the system prescribed by the
railroad commission. The railroad commission may prescribe the form
of books, accounts, records, and memoranda covering information in
addition to that required by the federal agency. The system of
accounts and the form of books, accounts, records, and memoranda
prescribed by the railroad commission for a gas utility or class of
utilities may not be inconsistent with the systems and forms
established by a federal agency for that gas utility or class of
utilities.
(d) Each gas utility shall:
(1) keep and provide its books, accounts, records, and
memoranda accurately and faithfully in the manner and form prescribed
by the railroad commission; and
(2) comply with the directions of the regulatory authority
relating to the books, accounts, records, and memoranda.
(e) In this section, "gas utility" includes a municipally owned
utility.

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Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 102.102. MAINTENANCE OF OFFICE AND RECORDS IN THIS STATE.

(a) Each gas utility shall maintain an office in this state in a
county in which some part of the utility's property is located. The
gas utility shall keep in this office all books, accounts, records,
and memoranda required by the railroad commission to be kept in this
state.
(b) A book, account, record, or memorandum required by the
regulatory authority to be kept in this state may not be removed from
this state except as prescribed by the railroad commission.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 102.103. COMMUNICATIONS WITH REGULATORY AUTHORITY. (a)

The regulatory authority shall adopt rules governing communications
with the regulatory authority or a member or employee of the
regulatory authority by:
(1) a gas utility;
(2) an affiliate; or
(3) a representative of a gas utility or affiliate.
(b) A record of a communication must contain:
(1) the name of the person contacting the regulatory
authority or member or employee of the regulatory authority;
(2) the name of the business entity represented;
(3) a brief description of the subject matter of the
communication; and
(4) the action, if any, requested by the gas utility,
affiliate, or representative.
(c) Records compiled under Subsection (b) shall be available to
the public monthly.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 102.104. JURISDICTION OVER AFFILIATE. The railroad

commission has jurisdiction over an affiliate that has a transaction
with a gas utility under the railroad commission's jurisdiction to
the extent of access to an account or a record of the affiliate

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relating to the transaction, including an account or a record of

joint or general expenses, any portion of which may be applicable to
the transaction.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER D. REQUIRED REPORTS AND FILINGS

Sec. 102.151. SCHEDULE FILINGS. (a) A gas utility shall file
with each regulatory authority schedules showing all rates that are:
(1) subject to the regulatory authority's original or
appellate jurisdiction; and
(2) in effect for a gas utility service, product, or
commodity offered by the gas utility.
(b) The gas utility shall file as a part of the schedules
required under Subsection (a) each rule or regulation that relates to
or affects:
(1) a rate of the gas utility; or
(2) a gas utility service, product, or commodity furnished
by the gas utility.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 102.152. DEPRECIATION ACCOUNT. The railroad commission

shall require each gas utility or municipally owned utility to carry
a proper and adequate depreciation account in accordance with:
(1) the rates and methods prescribed by the railroad
commission under Section 104.054; and
(2) any other rule the railroad commission adopts.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 102.153. ACCOUNTS OF PROFITS AND LOSSES. A gas utility or

municipally owned utility shall keep separate accounts showing
profits or losses from the sale or lease of merchandise, including an
appliance, a fixture, or equipment.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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Sec. 102.154. REPORT OF CERTAIN EXPENSES. A regulatory

authority may require a gas utility to annually report the utility's
expenditures for:
(1) business gifts and entertainment; and
(2) advertising or public relations, including expenditures
for institutional and consumption-inducing purposes.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER E. AUDITS AND INSPECTIONS

Sec. 102.201. INQUIRY INTO MANAGEMENT AND AFFAIRS. A
regulatory authority may inquire into the management and affairs of
each gas utility and shall keep itself informed as to the manner and
method in which each gas utility is managed and its affairs are
conducted.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 102.202. AUDIT OF ACCOUNTS. A regulatory authority may

require the examination and audit of the accounts of a gas or
municipally owned utility.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 102.203. INSPECTION. At a reasonable time for a

reasonable purpose, a regulatory authority and, to the extent
authorized by the regulatory authority, its counsel, agent, or
employee may:
(1) inspect and obtain copies of the papers, books,
accounts, documents, and other business records of a gas utility
within its jurisdiction; and
(2) inspect the plant, equipment, and other property of a
gas utility within its jurisdiction.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 102.204. EXAMINATIONS UNDER OATH. In connection with an

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investigation taken under Section 102.203, the regulatory authority

may:
(1) examine under oath an officer, agent, or employee of a
gas utility; or
(2) authorize the person conducting the action to make the
examination under oath.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 102.205. ENTERING PREMISES OF GAS UTILITY. (a) A member,

agent, or employee of a regulatory authority may enter the premises
occupied by a gas utility to conduct an inspection, examination, or
test or to exercise any other authority provided by this subtitle.
(b) A member, agent, or employee of the regulatory authority
may act under this section only during reasonable hours and after
reasonable notice to the gas utility.
(c) A gas utility is entitled to be represented when an
inspection, examination, or test is conducted on its premises. The
gas utility is entitled to a reasonable time to secure a
representative before the inspection, examination, or test begins.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 102.206. PRODUCTION OF OUT-OF-STATE RECORDS. (a) A

regulatory authority may require, by order or subpoena served on a
gas utility, the production, at the time and place in this state that
the regulatory authority designates, of any books, accounts, papers,
or records kept by that gas utility outside this state or, if ordered
by the railroad commission, verified copies of the books, accounts,
papers, or records.
(b) A gas utility that fails or refuses to comply with an order
or subpoena under this section violates this subtitle.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER F. GENERAL PROVISIONS RELATING TO PROCEEDINGS BEFORE

REGULATORY AUTHORITY
Sec. 102.251. RECORD OF PROCEEDING. The regulatory authority

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shall keep a record of each proceeding before the authority.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 102.252. RIGHT TO BE HEARD. Each party to a proceeding

before a regulatory authority is entitled to be heard by attorney or
in person.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

CHAPTER 103. JURISDICTION AND POWERS OF MUNICIPALITY

SUBCHAPTER A. GENERAL PROVISIONS
Sec. 103.001. MUNICIPAL JURISDICTION. To provide fair, just,
and reasonable rates and adequate and efficient services, the
governing body of a municipality has exclusive original jurisdiction
over the rates, operations, and services of a gas utility within the
municipality, subject to the limitations imposed by this subtitle,
unless the municipality surrenders its jurisdiction to the railroad
commission under Section 103.003.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 2001, 77th Leg., ch. 1233, Sec. 65, eff. Sept. 1, 2001.

Sec. 103.002. FRANCHISES. (a) This subtitle does not restrict

the rights and powers of a municipality to grant or refuse a
franchise to use the streets and alleys in the municipality or to
make a statutory charge for that use.
(b) A municipality that performs a regulatory function under
this subtitle may make each charge that is authorized by:
(1) this subtitle; or
(2) the applicable franchise agreement.
(c) A franchise agreement may not limit or interfere with a
power conferred on the railroad commission by this subtitle.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 103.003. SURRENDER OF MUNICIPAL JURISDICTION TO RAILROAD

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COMMISSION; REINSTATEMENT OF JURISDICTION. (a) A municipality may

elect to have the railroad commission exercise exclusive original
jurisdiction over gas utility rates, operations, and services in the
municipality by ordinance or by submitting the question of the
surrender of its jurisdiction to the voters at a municipal election.
(b) The governing body of a municipality shall submit at a
municipal election the question of surrendering its jurisdiction to
the railroad commission if the governing body receives a petition
signed by a number of qualified voters of the municipality equal to
at least the lesser of 20,000 or 10 percent of the number of voters
voting in the last preceding general election in the municipality.
(c) A municipality may not elect to surrender its jurisdiction
while a case involving the municipality is pending.
(d) A municipality that surrenders its jurisdiction to the
railroad commission may reinstate its jurisdiction. The provisions
of this section governing the surrender of jurisdiction apply to the
reinstatement of jurisdiction.

Added by Acts 2001, 77th Leg., ch. 1233, Sec. 66, eff. Sept. 1, 2001.

SUBCHAPTER B. RATE DETERMINATION

Sec. 103.021. MUNICIPAL PROCEEDINGS. (a) A municipality
regulating a gas utility under this subtitle shall require the
utility to submit information as necessary to make a reasonable
determination of rate base, expenses, investment, and rate of return
in the municipality.
(b) A municipality shall make a determination under Subsection
(a) using the procedures and requirements prescribed by this
subtitle.
(c) A municipality shall retain personnel necessary to make the
determination of reasonable rates.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 103.022. RATE ASSISTANCE AND COST REIMBURSEMENT. (a) The

governing body of a municipality participating in or conducting a
ratemaking proceeding may engage rate consultants, accountants,
auditors, attorneys, and engineers to:
(1) conduct investigations, present evidence, and advise

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and represent the governing body; and

(2) assist the governing body with litigation or a gas
utility ratemaking proceeding before a regulatory authority or court.
(b) The gas utility in the ratemaking proceeding shall
reimburse the governing body of the municipality for the reasonable
cost of the services of a person engaged under Subsection (a) to the
extent the applicable regulatory authority determines reasonable.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 103.023. MUNICIPAL STANDING. (a) A municipality has

standing in each case before the railroad commission that relates to
a gas utility's rates and services in the municipality.
(b) A municipality's standing is subject to the right of the
railroad commission to consolidate that municipality with another
party on an issue of common interest.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 103.024. JUDICIAL REVIEW. A municipality is entitled to

judicial review of a railroad commission order relating to a gas
utility's rates and services in a municipality as provided by Section
105.001.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER C. APPEAL OF MUNICIPAL ORDER

Sec. 103.051. APPEAL BY PARTY. A party to a rate proceeding
before a municipality's governing body may appeal the governing
body's decision to the railroad commission.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 103.052. APPEAL BY RESIDENTS. The residents of a

municipality may appeal to the railroad commission the decision of
the municipality's governing body in a rate proceeding by filing with
the railroad commission a petition for review signed by a number of

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qualified voters of the municipality equal to at least the lesser of

20,000 or 10 percent of the qualified voters of the municipality.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 103.053. APPEAL BY RATEPAYERS OUTSIDE MUNICIPALITY. (a)

The ratepayers of a municipally owned utility who are outside the
municipality may appeal to the railroad commission an action of the
municipality's governing body affecting the municipally owned
utility's rates by filing with the railroad commission a petition for
review signed by a number of ratepayers served by the utility outside
the municipality equal to at least the lesser of 10,000 or five
percent of those ratepayers.
(b) A petition for review is properly signed if signed by a
person or the spouse of a person in whose name residential utility
service is carried.
(c) For purposes of this section, each person who receives a
separate bill is a ratepayer. A person who receives more than one
bill may not be counted as more than one ratepayer.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 103.054. FILING OF APPEAL. (a) An appeal under this

subchapter is initiated by filing a petition for review with the
railroad commission and serving a copy of the petition on each party
to the original rate proceeding.
(b) The appeal must be initiated not later than the 30th day
after the date of the final decision by the governing body of the
municipality.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 103.055. HEARING AND ORDER. (a) An appeal under this

subchapter is de novo and based on the test year presented to the
municipality adjusted for known changes and conditions that are
measurable with reasonable accuracy.
(b) The railroad commission shall enter a final order
establishing the rates the railroad commission determines the

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municipality should have set in the ordinance to which the appeal

applies.
(c) If the railroad commission fails to enter a final order
within 185 days after the date the appeal is perfected, the rates
proposed by the gas utility are considered to be approved by the
railroad commission and take effect on the expiration of the 185-day
period.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 103.056. APPLICABILITY OF RATES. Temporary or permanent

rates set by the railroad commission are prospective and observed
from the date of the applicable railroad commission order, except an
interim rate order necessary to provide a gas utility the opportunity
to avoid confiscation during the period beginning on the date a
petition for review is filed with the railroad commission and ending
on the date of a final order establishing rates.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

CHAPTER 104. RATES AND SERVICES

SUBCHAPTER A. GENERAL PROVISIONS
Sec. 104.001. AUTHORIZATION TO ESTABLISH AND REGULATE RATES.
(a) The railroad commission is vested with all the authority and
power of this state to ensure compliance with the obligations of gas
utilities in this subtitle.
(b) The regulatory authority may establish and regulate rates
of a gas utility and may adopt rules for determining:
(1) the classification of customers and services; and
(2) the applicability of rates.
(c) A rule or order of the regulatory authority may not
conflict with a ruling of a federal regulatory body.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 104.002. COMPLIANCE WITH SUBTITLE. A gas utility may not:

(1) charge, collect, or receive a rate for utility service
except as provided by this subtitle; or

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(2) impose a rule or regulation except as provided by this

subtitle.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 104.003. JUST AND REASONABLE RATES. (a) The regulatory

authority shall ensure that each rate a gas utility or two or more
gas utilities jointly make, demand, or receive is just and
reasonable. A rate may not be unreasonably preferential,
prejudicial, or discriminatory but must be sufficient, equitable, and
consistent in application to each class of consumer. In establishing
a gas utility's rates, the railroad commission may treat as a single
class two or more municipalities that a gas utility serves if the
commission considers that treatment to be appropriate.
(b) A rate for a pipeline-to-pipeline transaction or to a
transportation, industrial, or similar large volume contract customer
is considered to be just and reasonable and otherwise to comply with
this section and shall be approved by the regulatory authority if:
(1) neither the gas utility nor the customer had an unfair
advantage during the negotiations;
(2) the rate is substantially the same as the rate between
the gas utility and at least two of those customers under the same or
similar conditions of service; or
(3) competition does or did exist with another gas utility,
another supplier of natural gas, or a supplier of an alternative form
of energy.
(c) Subsection (b) does not apply:
(1) if a complaint is filed with the railroad commission by
a transmission pipeline purchaser of gas sold or transported under
the pipeline-to-pipeline or transportation rate; or
(2) to a direct sale for resale to a gas distribution
utility at a city gate.
(d) The reasonableness of gas purchase costs included in a city
gate rate proposed to be charged for a sale for resale to a gas
distribution utility at a city gate may be reviewed at a city gate
rate proceeding even though the costs have been previously approved
as a rate for other parties under Subsection (b).
(e) Subsection (b)(1) does not apply to a rate charged or
offered to be charged to an affiliated pipeline utility.

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Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 104.004. UNREASONABLE PREFERENCE OR PREJUDICE PROHIBITED.

A gas utility may not:
(1) grant an unreasonable preference or advantage
concerning rates or services to a person in a classification;
(2) subject a person in a classification to an unreasonable
prejudice or disadvantage concerning rates or services; or
(3) establish or maintain an unreasonable difference
concerning rates of services between localities or between classes of
service.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 104.005. EQUALITY OF RATES AND SERVICES. (a) A gas

utility may not directly or indirectly charge, demand, collect, or
receive from a person a greater or lesser compensation for a service
provided or to be provided by the utility than the compensation
prescribed by the applicable schedule of rates filed under Section
102.151.
(b) A person may not knowingly receive or accept a service from
a gas utility for a compensation greater or less than the
compensation prescribed by the schedules. A rate charged and
collected by a gas utility on September 1, 1983, may be continued
until schedules are filed.
(c) After notice and hearing, the railroad commission may, in
the public interest, order a gas utility to refund with interest
compensation received in violation of this section.
(d) This subtitle does not prevent a cooperative corporation
from returning to its members net earnings resulting from its
operations in proportion to the members' purchases from or through
the corporation.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 104.006. RATES FOR AREA NOT IN MUNICIPALITY. Without the

approval of the railroad commission, a gas utility's rates for an
area not in a municipality may not exceed 115 percent of the average

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 UTILITIES CODE

of all rates for similar services for all municipalities served by

the same utility in the same county as that area.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 104.007. DISCRIMINATION AND RESTRICTION ON COMPETITION. A

gas utility may not:
(1) discriminate against a person who sells or leases
equipment or performs services in competition with the gas utility;
or
(2) engage in a practice that tends to restrict or impair
that competition.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 104.008. BURDEN OF PROOF. In a proceeding involving a

proposed rate change, the gas utility has the burden of proving that:
(1) the rate change is just and reasonable, if the utility
proposes the change; or
(2) an existing rate is just and reasonable, if the
proposal is to reduce the rate.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER B. COMPUTATION OF RATES

Sec. 104.051. ESTABLISHING OVERALL REVENUES. In establishing a
gas utility's rates, the regulatory authority shall establish the
utility's overall revenues at an amount that will permit the utility
a reasonable opportunity to earn a reasonable return on the utility's
invested capital used and useful in providing service to the public
in excess of its reasonable and necessary operating expenses.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 104.052. ESTABLISHING FAIR RATE OF RETURN. The regulatory

authority may not establish a rate that yields more than a fair
return on the adjusted value of the invested capital used and useful

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in providing service to the public.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 104.053. COMPONENTS OF ADJUSTED VALUE OF INVESTED CAPITAL.

(a) Gas utility rates shall be based on the adjusted value of
invested capital used and useful to the utility in providing service
and that adjusted value shall be computed on the basis of a
reasonable balance between:
(1) original cost, less depreciation; and
(2) current cost, less an adjustment for present age and
condition.
(b) The regulatory authority may determine a reasonable balance
that reflects:
(1) not less than 60 percent nor more than 75 percent of
the original cost of the property at the time the property was
dedicated to public use, whether by the gas utility that is the
present owner or by a predecessor, less depreciation; and
(2) not less than 25 percent nor more than 40 percent of
the current cost less an adjustment for present age and condition.
(c) In determining a reasonable balance, the regulatory
authority may consider inflation, deflation, quality of service being
provided, growth rate of the service area, and need for the gas
utility to attract new capital.
(d) Construction work in progress, at cost as recorded on the
gas utility's books, may be included as part of the adjusted value of
invested capital used by and useful to the utility in providing
service, as necessary to the financial integrity of the utility.
(e) Costs of facilities, revenues, expenses, taxes, and
reserves shall be separated or allocated as prescribed by the
regulatory authority.
(f) In this section, "original cost" means the actual money
cost or the actual money value of consideration paid other than
money.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 104.054. DEPRECIATION, AMORTIZATION, AND DEPLETION. (a)

The railroad commission shall establish proper and adequate rates and

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methods of depreciation, amortization, or depletion for each class of

property of a gas utility or municipally owned utility.
(b) The rates and methods established under this section and
the depreciation account required under Section 102.152 shall be used
uniformly and consistently throughout rate-setting and appeal
proceedings.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 104.055. NET INCOME; ALLOWABLE EXPENSES. (a) Net income

shall be used to establish just and reasonable rates. For that
purpose, "net income" means the total revenues of the gas utility
from gas utility service less all reasonable and necessary expenses
related to that gas utility service. The regulatory authority shall
determine those revenues and expenses in a manner consistent with
this subchapter.
(b) In establishing a gas utility's rates, the regulatory
authority may not allow a gas utility's payment to an affiliate for
the cost of a service, property, right, or other item or for an
interest expense to be included as capital cost or as expense related
to gas utility service except to the extent that the regulatory
authority finds the payment is reasonable and necessary for each item
or class of items as determined by the regulatory authority. That
finding must include:
(1) a specific finding of the reasonableness and necessity
of each item or class of items allowed; and
(2) a finding that the price to the gas utility is not
higher than the prices charged by the supplying affiliate to its
other affiliates or divisions or to a nonaffiliated person for the
same item or class of items.
(c) If an expense is allowed to be included in utility rates,
or an investment is included in the utility rate base, the related
income tax deduction or benefit shall be included in the computation
of income tax expense to reduce the rates. If an expense is
disallowed or not included in utility rates, or an investment is not
included in the utility rate base, the related income tax deduction
or benefit may not be included in the computation of income tax
expense to reduce the rates. The income tax expense shall be
computed using the statutory income tax rates.

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 UTILITIES CODE

(d) The regulatory authority may adopt reasonable rules

complying with this section with respect to including and excluding
certain expenses in computing the rates to be established.
(e) This section is not intended to increase gas utility rates
to the customer not caused by utility service. Utility rates may
include only expenses caused by utility service.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 104.056. TREATMENT OF CERTAIN TAX BENEFITS. (a) In

determining the allocation of tax savings derived from liberalized
depreciation and amortization, the investment tax credit, and the
application of similar methods, the regulatory authority shall:
(1) balance equitably the interests of present and future
customers; and
(2) apportion accordingly the benefits between consumers
and the gas utility or municipally owned utility.
(b) If a gas utility or municipally owned utility retains a
portion of the investment tax credit, that portion shall be deducted
from the original cost of the facilities or other addition to the
rate base to which the credit applied to the extent allowed by the
Internal Revenue Code.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 104.057. CONSIDERATION OF CERTAIN EXPENSES. (a) In

establishing a gas utility's rates, the regulatory authority may not
allow as a cost or expense an expenditure:
(1) described by Section 102.154 that the regulatory
authority determines to be not in the public interest; or
(2) for legislative advocacy.
(b) The regulatory authority may allow as a cost or expense
reasonable charitable or civic contributions not to exceed the amount
approved by the regulatory authority.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 104.058. CONSIDERATION OF PROFIT OR LOSS FROM SALE OR

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LEASE OF MERCHANDISE. In establishing a gas utility's or municipally

owned utility's rates, the regulatory authority may not consider a
profit or loss that results from the sale or lease of merchandise,
including appliances, fixtures, or equipment, to the extent that
merchandise is not integral to providing utility service.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 104.059. PENSION AND OTHER POSTEMPLOYMENT BENEFITS. (a)

In establishing a gas utility's rates, the regulatory authority shall
allow recovery of the gas utility's costs of pensions and other
postemployment benefits, as determined by actuarial or other similar
studies in accordance with generally accepted accounting principles,
in amounts the regulatory authority finds reasonable and necessary.
(b) If a gas utility establishes one or more reserve accounts
for the purpose of tracking changes in the costs of pensions and
other postemployment benefits, the gas utility shall periodically
record in a reserve account any difference between:
(1) the annual amount of pension and other postemployment
benefits approved and included in the gas utility's then current
rates or, if that annual amount cannot be determined from the
regulatory authority's order, the amount recorded for pension and
other postemployment benefits under generally accepted accounting
principles during the first year that rates from the gas utility's
last general rate proceeding were in effect; and
(2) the annual amount of costs of pensions and other
postemployment benefits as determined by actuarial or other similar
studies that would otherwise be recorded by the gas utility were this
provision not applicable.
(c) The gas utility must:
(1) establish separate reserve accounts for pensions and
for other postemployment benefits; and
(2) apply the same methodology to allocate pension and
other postemployment benefits between capital and expense as in the
gas utility's last rate case.
(d) A surplus in a reserve account exists if the amount of
pension and other postemployment benefits under Subsection (b)(1) is
greater than the amount determined under Subsection (b)(2). A
shortage in a reserve account exists if the amount of pension and

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 UTILITIES CODE

other postemployment benefits under Subsection (b)(1) is less than

the amount determined under Subsection (b)(2).
(e) If the gas utility establishes reserve accounts for the
costs of pensions and other postemployment benefits, the regulatory
authority at a subsequent general rate proceeding shall:
(1) review the amounts recorded to each reserve account to
determine whether the amounts are reasonable and necessary;
(2) determine in accordance with Subsection (d) whether
each reserve account has a surplus or shortage; and
(3) subtract any surplus from or add any shortage to the
gas utility's rate base, with the surplus or shortage amortized over
a reasonable time.

Added by Acts 2011, 82nd Leg., R.S., Ch. 172 (S.B. 403), Sec. 1, eff.
May 28, 2011.

Sec. 104.060. CONSIDERATION OF COMPENSATION AND BENEFIT

EXPENSES. (a) In this section, "employee compensation and benefits"
includes base salaries, wages, incentive compensation, and benefits.
The term does not include:
(1) pension or other postemployment benefits; and
(2) incentive compensation related to attaining financial
metrics for an executive officer whose compensation is required to be
disclosed under 17 C.F.R. Section 229.402(a).
(b) When establishing a gas utility's rates, the regulatory
authority shall presume that employee compensation and benefits
expenses are reasonable and necessary if the expenses are consistent
with market compensation studies issued not earlier than three years
before the initiation of the proceeding to establish the rates.

Added by Acts 2019, 86th Leg., R.S., Ch. 1362 (H.B. 1767), Sec. 1,
eff. June 15, 2019.

SUBCHAPTER C. RATE CHANGES PROPOSED BY UTILITY

Sec. 104.101. DEFINITION. In this subchapter, "major change"
means an increase in rates that would increase the aggregate revenues
of the applicant more than the greater of $100,000 or 2-1/2 percent.
The term does not include an increase in rates that the regulatory
authority allows to go into effect or the gas utility makes under an

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order of the regulatory authority after hearings held with public

notice.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 104.102. STATEMENT OF INTENT TO INCREASE RATES. (a) A

gas utility may not increase its rates unless the utility files a
statement of its intent with the regulatory authority that has
original jurisdiction over those rates at least 35 days before the
effective date of the proposed increase.
(b) The gas utility shall also mail or deliver a copy of the
statement of intent to the appropriate officer of each affected
municipality.
(c) The statement of intent must include:
(1) proposed revisions of tariffs and schedules; and
(2) a detailed statement of:
(A) each proposed increase;
(B) the effect the proposed increase is expected to
have on the revenues of the utility;
(C) each class and number of utility consumers
affected; and
(D) any other information required by the regulatory
authority's rules and regulations.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 104.103. NOTICE OF INTENT TO INCREASE RATES. (a) The gas

utility shall:
(1) publish, in conspicuous form, notice to the public of
the proposed increase once each week for four successive weeks in a
newspaper having general circulation in each county containing
territory affected by the proposed increase; and
(2) provide notice of the proposed increase to any other
affected person as required by the regulatory authority's rules.
(b) Instead of publishing newspaper notice, a gas utility may
provide notice by:
(1) mailing the notice by United States mail, postage
prepaid, to the billing address of each directly affected customer;
(2) including the notice, in conspicuous form, in the bill

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of each directly affected customer; or

(3) sending the notice by e-mail to each directly affected
customer if that address is available to the utility.
(c) A gas utility may provide a customer with notice of the
utility's intent to increase rates by e-mail as described by
Subsection (b)(3) only if the customer has consented in writing to
the use of the customer's e-mail address for that purpose.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2013, 83rd Leg., R.S., Ch. 103 (S.B. 885), Sec. 1, eff.
September 1, 2013.

Sec. 104.104. EARLY EFFECTIVE DATE OF RATE INCREASE. (a) For

good cause shown, the regulatory authority may allow a rate increase,
other than a major change, to take effect:
(1) before the end of the 35-day period prescribed by
Section 104.102; and
(2) under conditions the regulatory authority prescribes,
subject to suspension as provided by this subchapter.
(b) The gas utility shall immediately revise its schedules to
include the increase.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 104.105. DETERMINATION OF PROPRIETY OF RATE CHANGE;

HEARING. (a) If a schedule modifying or increasing rates is filed
with a regulatory authority, the regulatory authority shall, on
complaint by an affected person, or may, on its own motion, not later
than the 30th day after the effective date of the increase, enter on
a hearing to determine the propriety of the increase.
(b) The regulatory authority shall hold a hearing in every case
in which the increase constitutes a major change. The regulatory
authority may, however, use an informal proceeding if the regulatory
authority does not receive a complaint before the expiration of 45
days after the date notice of the increase is filed.
(c) The regulatory authority shall give reasonable notice of
the hearing, including notice to the governing body of each affected
municipality and county. The gas utility is not required to provide

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a formal answer or file any other formal pleading in response to the

notice, and the absence of an answer does not affect an order for a
hearing.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 104.106. PREFERENCE TO HEARING. The regulatory authority

shall:
(1) give preference to the hearing under this subchapter
and to deciding questions arising under this subchapter over any
other question pending before it; and
(2) decide the questions as quickly as possible.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 104.107. RATE SUSPENSION; DEADLINE. (a) Pending the

hearing and a decision:
(1) the local regulatory authority, after delivering to the
gas utility a written statement of the regulatory authority's
reasons, may suspend the operation of the schedule for not longer
than 90 days after the date the schedule would otherwise be
effective; and
(2) the railroad commission may suspend the operation of
the schedule for not longer than 150 days after the date the schedule
would otherwise be effective.
(b) The 150-day period prescribed by Subsection (a)(2) shall be
extended for two days for each day the actual hearing on the merits
of the case exceeds 15 days.
(c) If the regulatory authority does not make a final
determination concerning a schedule of rates before expiration of the
applicable suspension period, the regulatory authority is considered
to have approved the schedule. This approval is subject to the
authority of the regulatory authority thereafter to continue a
hearing in progress.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 2001, 77th Leg., ch. 1233, Sec. 67, eff. Sept. 1, 2001.

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Sec. 104.108. TEMPORARY RATES. (a) The regulatory authority

may establish temporary rates to be in effect during the applicable
suspension period under Section 104.107.
(b) If the regulatory authority does not establish temporary
rates, the rates in effect when the suspended schedule was filed
continue in effect during the suspension period.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 104.109. BONDED RATES. (a) A gas utility may put a

changed rate into effect by filing a bond with the regulatory
authority if the regulatory authority fails to make a final
determination within 90 days from the date the proposed increase
would otherwise be effective.
(b) The bonded rate may not exceed the proposed rate.
(c) The bond must be:
(1) payable to the regulatory authority in an amount, in a
form, and with a surety approved by the regulatory authority; and
(2) conditioned on refund.
(d) The gas utility shall refund or credit against future
bills:
(1) money collected under the bonded rates in excess of the
rate finally ordered; and
(2) interest on that money, at the current interest rate as
determined by the regulatory authority.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 104.110. ESTABLISHMENT OF FINAL RATES. (a) If, after

hearing, the regulatory authority finds the rates are unreasonable or
in violation of law, the regulatory authority shall:
(1) enter an order establishing the rates the gas utility
shall charge or apply for the service in question; and
(2) serve a copy of the order on the gas utility.
(b) The rates established in the order shall be observed
thereafter until changed as provided by this subtitle.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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Sec. 104.111. APPROVAL OF DECREASE IN RATES. Notwithstanding

any other provision in this subtitle, the regulatory authority may,
without reference to the cost of service standard prescribed by
Section 104.051, administratively approve a decrease in rates
proposed by the applicant and agreed on by each party directly
affected unless the regulatory authority determines that the proposed
decrease is not in the public interest.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 104.112. SURCHARGE TO RECOVER RELOCATION COSTS. (a) This

section applies to a gas utility's costs of relocating a facility to
accommodate construction or improvement of a highway, road, street,
public way, or other public work by or on behalf of the United
States, this state, a political subdivision of this state, or another
entity having the power of eminent domain that are not reimbursed by
a source other than as provided by this section.
(b) A gas utility may recover its relocation costs to which
this section applies through a surcharge on gas volumes sold and
transported to customers in the service area where the relocation
occurred by applying to each appropriate regulatory authority for a
new rate schedule or tariff. The gas utility is not required to file
a statement of intent to increase rates to institute the surcharge,
and the other provisions of this subchapter, other than appeal
rights, do not apply to institution of the surcharge.
(c) An application under Subsection (b) must include sufficient
documentation to demonstrate:
(1) the requirement for each relocation;
(2) the entity requiring the relocation;
(3) costs incurred for relocation of comparable facilities;
(4) surcharge computations; and
(5) that reasonable efforts have been made to receive
reimbursement from the entity requiring the relocation, if
applicable.
(d) Not later than the 35th day after the date an application
under Subsection (b) is received, the regulatory authority shall
administratively grant or deny the application. Denial of the
application must be based on a finding that:
(1) the relocation was not necessary or required;

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(2) the costs of the relocation were excessive or not

supported;
(3) the utility did not pursue reimbursement from the
entity requiring the relocation, if applicable;
(4) the surcharge is unduly discriminatory among customers
or classes of customers located in the service area; or
(5) the period over which the relocation costs are designed
to be recovered is less than one or more than three years.
(e) If the regulating authority does not make a decision before
the deadline prescribed by Subsection (d), the application is
approved.

Added by Acts 1999, 76th Leg., ch. 219, Sec. 1, eff. Sept. 1, 1999.
Amended by Acts 2001, 77th Leg., ch. 662, Sec. 1, eff. Sept. 1, 2001.

SUBCHAPTER D. RATE CHANGES PROPOSED BY COMMISSION

Sec. 104.151. UNREASONABLE OR VIOLATIVE EXISTING RATES. (a)
If the regulatory authority, on its own motion or on complaint by an
affected person, after reasonable notice and hearing, finds that the
existing rates of a gas utility for a service are unreasonable or in
violation of law, the regulatory authority shall:
(1) enter an order establishing the just and reasonable
rates to be observed thereafter, including maximum or minimum rates;
and
(2) serve a copy of the order on the gas utility.
(b) The rates set under Subsection (a) constitute the legal
rates of the gas utility until changed as provided by this subtitle.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 104.152. INVESTIGATING COSTS OF OBTAINING SERVICE FROM

ANOTHER SOURCE. If a gas utility does not produce the service that
it distributes, transmits, or furnishes to the public for
compensation but obtains the service from another source, the
regulatory authority may investigate the cost of that production in
an investigation of the reasonableness of the gas utility's rates.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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SUBCHAPTER E. RATES FOR GOVERNMENTAL ENTITIES

Sec. 104.201. TRANSPORTATION RATES BETWEEN GAS UTILITY OR
MUNICIPALLY OWNED UTILITY AND STATE AGENCY. (a) Notwithstanding
Section 104.003(b), absent a contract for transportation service
between a state agency and a gas utility or municipally owned
utility, the railroad commission, not later than the 210th day after
the date either party files a request to set a transportation rate,
shall establish the transportation rate for the state agency. The
commission has exclusive original jurisdiction to establish a
transportation rate for a state agency under this section.
(b) The railroad commission shall base its determination of the
transportation rate under Subsection (a) on the cost of providing the
transportation service for both the distribution system and the
transmission system, as applicable, of the gas utility or municipally
owned utility.
(c) The railroad commission may order temporary rates under
Subsection (a) as provided for under the commission's appellate
jurisdiction.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 104.202. EXCLUDED EXPENSES. (a) The rates that a gas

utility or municipally owned utility charges a state agency may not
include an amount representing a gross receipts assessment,
regulatory assessment, or similar expense of the utility.
(b) An expense under Subsection (a) that is reasonable and is
not recovered from a state agency under this section may be recovered
from other customers of the gas utility or municipally owned utility.
(c) A gross receipts assessment, regulatory assessment, or
similar expense of the utility does not include a payment to a
municipality under a contract, franchise, or other agreement.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 1326, Sec. 1, eff. June 18, 1999.

Sec. 104.203. PAYMENT IN LIEU OF TAX. (a) A payment made in

lieu of a tax by a municipally owned utility to the municipality by
which the utility is owned may not be considered an expense of
operation in establishing the utility's rate for providing utility

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service to a school district or hospital district.

(b) A rate a municipally owned utility receives from a school
district or hospital district may not be used to make or to cover the
cost of making payments in lieu of taxes to the municipality that
owns the utility.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER F. SERVICES
Sec. 104.251. GENERAL STANDARD. A gas utility shall furnish
service, instrumentalities, and facilities that are safe, adequate,
efficient, and reasonable.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 104.252. AUTHORITY OF REGULATORY AUTHORITY CONCERNING

STANDARDS. A regulatory authority, on its own motion or on complaint
and after reasonable notice and hearing, may:
(1) adopt just and reasonable standards, classifications,
regulations, or practices a gas utility must follow in furnishing a
service;
(2) adopt adequate and reasonable standards for measuring a
condition, including quantity, quality, and pressure relating to the
furnishing of a service;
(3) adopt reasonable regulations for examining, testing,
and measuring a service; and
(4) adopt or approve reasonable rules, regulations,
specifications, and standards to ensure the accuracy of equipment,
including meters and instruments, used to measure a service.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 104.253. RULE OR STANDARD. (a) A gas utility may file

with the regulatory authority a standard, classification, regulation,
or practice the utility follows.
(b) The standard, classification, regulation, or practice
continues in force until:
(1) amended by the utility; or

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(2) changed by the regulatory authority as provided by this

subtitle.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 104.254. SERVICE. A gas utility or municipally owned

utility may not refuse to provide service to a state agency if
pipeline capacity is available on an existing facility of the
utility.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 104.2545. REQUIRED SERVICE TO PUBLIC RETAIL CUSTOMER. (a)

In this section, "service site" means facilities or buildings
operated by a public retail customer or a group of adjacent
facilities or buildings operated by a public retail customer within
one contiguous geographical area.
(b) Unless the utility is prohibited by other law from
providing the service and if sufficient pipeline capacity is
available on an existing facility of the utility to provide the
service, a gas utility or municipally owned utility may not refuse to
provide service to a public retail customer at a service site, at
rates established as provided by Subsection (c), the following
services:
(1) the sale of gas;
(2) the transportation of an annual average of 25 million
British thermal units or more each day of gas that is:
(A) taken as a royalty in kind; and
(B) owned by the state or managed by a marketing
program operated by the state or by a state agency; or
(3) a combination of the services described by Subdivisions
(1) and (2).
(c) A utility shall provide a service described by Subsection
(b) at rates provided by a written contract negotiated between the
utility and the state or a state agency. If the utility and the
state or state agency are not able to agree to a contract rate, a
fair and reasonable rate may be determined for the public retail
customer, as a rate for a separate class of service, by the railroad
commission or, for municipally owned gas utilities, by the relevant

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regulatory body under this chapter.

(d) In this section, "public retail customer" has the meaning
assigned by Section 101.009.

Added by Acts 1999, 76th Leg., ch. 300, Sec. 1, eff. Sept. 1, 1999.
Amended by Acts 2003, 78th Leg., ch. 563, Sec. 1, eff. June 20, 2003.
Amended by:
Acts 2019, 86th Leg., R.S., Ch. 53 (H.B. 2263), Sec. 6, eff. May
17, 2019.

Sec. 104.255. BILLING. (a) A gas utility or municipally owned

utility may not bill or otherwise require the state or a state agency
or institution to pay for service before the service is provided.
(b) The railroad commission shall adopt rules concerning
payment of bills by the state or a state agency to a gas utility or
municipally owned utility. The rules must be consistent with Chapter
2251, Government Code.
(c) This subtitle does not prohibit a gas utility or
municipally owned utility from entering into an agreement with the
state or a state agency to establish a level or average monthly
service billing plan. An agreement under this subsection must
require reconciliation of the leveled or equalized bills quarterly.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 104.2551. ELECTRONIC BILLING. A gas utility or

municipally owned utility may transmit the utility's bill for
services through the Internet or by other electronic means instead of
through the United States mail on the request of a customer of the
gas utility or municipally owned utility.

Added by Acts 2001, 77th Leg., ch. 1233, Sec. 68, eff. Sept. 1, 2001.

Sec. 104.256. EXAMINATION AND TEST OF INSTRUMENT OR EQUIPMENT;

INSPECTION. (a) A regulatory authority may:
(1) examine and test equipment, including meters and
instruments, used to measure service of a gas utility; and
(2) set up and use on the premises occupied by a gas

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utility an apparatus or appliance necessary for the examination or

test.
(b) The gas utility is entitled to be represented at an
examination, test, or inspection made under this section.
(c) The gas utility and its officers and employees shall
facilitate the examination, test, or inspection by giving reasonable
aid to the regulatory authority and to any person designated by the
regulatory authority for the performance of those duties.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 104.257. INSPECTION FOR CONSUMER. (a) A consumer may

have a meter or other measuring device tested by a gas utility:
(1) once without charge, after a reasonable period of
presumed accuracy that the regulatory authority establishes by rule;
and
(2) at a shorter interval on payment of a reasonable fee
established by the regulatory authority.
(b) The regulatory authority shall establish reasonable fees to
be paid for other examining or testing of a measuring device on the
request of a consumer.
(c) If the consumer requests the test under Subsection (a)(2)
and the measuring device is found unreasonably defective or incorrect
to the substantial disadvantage of the consumer, the fee the consumer
paid at the time of the request shall be refunded.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 104.258. DISCONNECTION OF GAS SERVICE. (a) In this

section:
(1) "Extreme weather emergency" means a period during which
the previous day's highest temperature did not exceed 32 degrees
Fahrenheit and the temperature is predicted to remain at or below
that level for the next 24 hours according to the nearest National
Weather Service reports.
(2) "Provider" means:
(A) a gas utility, as defined by Sections 101.003 and
121.001; and
(B) an owner, operator, or manager of a mobile home

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park or apartment who purchases natural gas through a master meter

for delivery to a dwelling unit in a mobile home park or apartment
house under Chapter 124.
(b) A provider may not disconnect natural gas service to a
residential customer on a weekend day unless personnel of the
provider are available on that day to take payments and reconnect
service.
(c) A provider may not disconnect natural gas service to a
residential customer during an extreme weather emergency. The
provider shall defer collection of the full payment of bills that are
due during an extreme weather emergency until after the emergency is
over and shall work with customers to establish a pay schedule for
deferred bills.

Added by Acts 2001, 77th Leg., ch. 1149, Sec. 1, eff. Sept. 1, 2001.

SUBCHAPTER G. INTERIM COST RECOVERY AND RATE ADJUSTMENT

Sec. 104.301. INTERIM ADJUSTMENT FOR CHANGES IN INVESTMENT.
(a) A gas utility that has filed a rate case under Subchapter C
within the preceding two years may file with the regulatory authority
a tariff or rate schedule that provides for an interim adjustment in
the utility's monthly customer charge or initial block rate to
recover the cost of changes in the investment in service for gas
utility services. The adjustment shall be allocated among the gas
utility's classes of customers in the same manner as the cost of
service was allocated among classes of customers in the utility's
latest effective rates for the area in which the tariff or rate
schedule is implemented. The gas utility shall file the tariff or
rate schedule, or the annual adjustment under Subsection (c), with
the regulatory authority at least 60 days before the proposed
implementation date of the tariff, rate schedule, or annual
adjustment. The gas utility shall provide notice of the tariff, rate
schedule, or annual adjustment to affected customers by bill insert
or direct mail not later than the 45th day after the date the utility
files the tariff, rate schedule, or annual adjustment with the
regulatory authority. During the 60-day period, the regulatory
authority may act to suspend the implementation of the tariff, rate
schedule, or annual adjustment for up to 45 days. After the issuance
of a final order or decision by a regulatory authority in a rate case

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that is filed after the implementation of a tariff or rate schedule

under this section, any change in investment that has been included
in an interim adjustment in accordance with the tariff or rate
schedule under this section shall no longer be subject to subsequent
review for reasonableness or prudence. Until the issuance of a final
order or decision by a regulatory authority in a rate case that is
filed after the implementation of a tariff or rate schedule under
this section, all amounts collected under the tariff or rate schedule
before the filing of the rate case are subject to refund.
(b) The amount the gas utility shall adjust the utility's rates
upward or downward under the tariff or rate schedule each calendar
year is based on the difference between the value of the invested
capital for the preceding calendar year and the value of the invested
capital for the calendar year preceding that calendar year. The
value of the invested capital is equal to the original cost of the
investment at the time the investment was first dedicated to public
use minus the accumulated depreciation related to that investment.
(c) The interim adjustment shall be recalculated on an annual
basis in accordance with the requirements of Subsection (b). The gas
utility may file a request with the regulatory authority to suspend
the operation of the tariff or rate schedule for any year. The
request must be in writing and state the reasons why the suspension
is justified. The regulatory authority may grant the suspension on a
showing by the utility of reasonable justification.
(d) A gas utility may only adjust the utility's rates under the
tariff or rate schedule for the return on investment, depreciation
expense, ad valorem taxes, revenue related taxes, and incremental
federal income taxes related to the difference in the value of the
invested capital as determined under Subsection (b). The return on
investment, depreciation, and incremental federal income tax factors
used in the computation must be the same as the factors reflected in
the final order issued by or settlement agreement approved by the
regulatory authority establishing the gas utility's latest effective
rates for the area in which the tariff or rate schedule is
implemented.
(e) A gas utility that implements a tariff or rate schedule
under this section shall file with the regulatory authority an annual
report describing the investment projects completed and placed in
service during the preceding calendar year and the investments
retired or abandoned during the preceding calendar year. The annual

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report shall also state the cost, need, and customers benefited by
the change in investment.
(f) In addition to the report required under Subsection (e),
the gas utility shall file with the regulatory authority an annual
earnings monitoring report demonstrating the utility's earnings
during the preceding calendar year.
(g) If the gas utility is earning a return on invested capital,
as demonstrated by the report filed under Subsection (f), of more
than 75 basis points above the return established in the latest
effective rates approved by a regulatory authority for the area in
which the tariff or rate schedule is implemented under this section,
the gas utility shall file a statement with that report stating the
reasons why the rates are not unreasonable or in violation of law.
(h) If a gas utility that implements a tariff or rate schedule
under this section does not file a rate case under Subchapter C
before the fifth anniversary of the date on which the tariff or rate
schedule takes effect, the gas utility shall file a rate case under
that subchapter not later than the 180th day after that anniversary
in relation to any rates subject to the tariff or rate schedule.
(i) This section does not limit the power of a regulatory
authority under Section 104.151.
(j) A gas utility implementing a tariff or rate schedule under
this section shall reimburse the railroad commission the utility's
proportionate share of the railroad commission's costs related to the
administration of the interim rate adjustment mechanism provided by
this section.

Added by Acts 2003, 78th Leg., ch. 938, Sec. 1, eff. Sept. 1, 2003.
Amended by:
Acts 2005, 79th Leg., Ch. 948 (H.B. 872), Sec. 1, eff. September
1, 2005.

SUBCHAPTER H. PROTECTION AGAINST UTILITY SERVICE DISCONNECTION

Sec. 104.351. DEFINITIONS. In this subchapter:
(1) "Customer" means any person in whose name gas utility
service is billed, including individuals, governmental units at all
levels of government, corporate entities, and any other entity with
legal capacity to be billed for gas service.
(2) "Gas utility" has the meaning assigned by Section

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181.021 but does not include a municipally owned utility or gas

utility owned by an electric cooperative.
(3) "Nonsubmetered master metered multifamily property"
means an apartment, a leased or owner-occupied condominium, or one or
more buildings containing at least 10 dwellings that receive gas
utility service that is master metered but not submetered.

Added by Acts 2013, 83rd Leg., R.S., Ch. 322 (H.B. 1772), Sec. 3, eff.
January 1, 2014.

Sec. 104.352. NOTICE OF DISCONNECTION TO MUNICIPALITIES FOR

NONSUBMETERED MASTER METERED MULTIFAMILY PROPERTIES. (a) A gas
utility shall send a written notice of service disconnection to a
municipality before the gas utility disconnects service to a
nonsubmetered master metered multifamily property for nonpayment if:
(1) the property is located in the municipality; and
(2) the municipality establishes an authorized
representative to receive the notice as described by Section
104.353(c).
(b) The gas utility shall send the notice required by this
section not later than the 10th day before the date gas utility
service is scheduled for disconnection.

Added by Acts 2013, 83rd Leg., R.S., Ch. 322 (H.B. 1772), Sec. 3, eff.
January 1, 2014.

Sec. 104.353. ADDITIONAL SAFEGUARDS. (a) The customer

safeguards provided by this subchapter are in addition to safeguards
provided by other law or agency rules.
(b) This subchapter does not prohibit a municipality or the
regulatory authority from adopting customer safeguards that exceed
the safeguards provided by this chapter.
(c) The regulatory authority by rule shall develop a mechanism
by which a municipality may provide the regulatory authority with the
contact information of the municipality's authorized representative
to whom the notice required by Section 104.352 must be sent. The
regulatory authority shall make the contact information available to
the public.

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Added by Acts 2013, 83rd Leg., R.S., Ch. 322 (H.B. 1772), Sec. 3, eff.
January 1, 2014.

SUBCHAPTER I. CUSTOMER RATE RELIEF BONDS

Sec. 104.361. PURPOSE; RAILROAD COMMISSION DUTY. (a) The
purpose of this subchapter is to reduce the cost that customers would
otherwise experience because of extraordinary costs that gas
utilities incurred to secure gas supply and provide service during
Winter Storm Uri, and to restore gas utility systems after that
event, by providing securitization financing for gas utilities to
recover those costs. The securitization financing mechanism
authorized by this subchapter will:
(1) provide rate relief to customers by extending the
period during which the costs described by this subsection are
recovered from customers; and
(2) support the financial strength and stability of gas
utility companies.
(b) The railroad commission shall ensure that securitization
provides tangible and quantifiable benefits to customers, greater
than would have been achieved absent the issuance of customer rate
relief bonds.

Added by Acts 2021, 87th Leg., R.S., Ch. 805 (H.B. 1520), Sec. 5, eff.
June 16, 2021.

Sec. 104.362. DEFINITIONS. In this subchapter:

(1) "Ancillary agreement" means a financial arrangement
entered into in connection with the issuance or payment of customer
rate relief bonds that enhances the marketability, security, or
creditworthiness of customer rate relief bonds, including a bond,
insurance policy, letter of credit, reserve account, surety bond,
interest rate or currency swap arrangement, interest rate lock
agreement, forward payment conversion agreement, credit agreement,
other hedging arrangement, or liquidity or credit support
arrangement.
(2) "Authority" means the Texas Public Finance Authority.
(3) "Bond administrative expenses" means all costs and
expenses incurred by the railroad commission, the authority, or any

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issuing financing entity to evaluate, issue, and administer customer

rate relief bonds issued under this subchapter, including fees and
expenses of the authority, any bond administrator, and the issuing
financing entity, fees for paying agents, trustees, and attorneys,
and fees for paying for other consulting and professional services
necessary to ensure compliance with this subchapter, applicable state
or federal law, and the terms of the financing order.
(4) "Bond obligations" means the principal of a customer
rate relief bond and any premium and interest on a customer rate
relief bond issued under this subchapter, together with any amount
owed under a related ancillary agreement or credit agreement.
(5) "Credit agreement" has the meaning assigned by Section
1371.001, Government Code.
(6) "Customer rate relief bonds" means bonds, notes,
certificates, or other evidence of indebtedness or ownership the
proceeds of which are used directly or indirectly to recover,
finance, or refinance regulatory assets approved by the railroad
commission, including extraordinary costs and related financing
costs, and that are:
(A) issued by an issuing financing entity under a
financing order; and
(B) payable from and secured by customer rate relief
property and amounts on deposit in any trust accounts established for
the benefit of the customer rate relief bondholders as approved by
the applicable financing order.
(7) "Customer rate relief charges" means the amounts
authorized by the railroad commission as nonbypassable charges to
repay, finance, or refinance regulatory assets, including
extraordinary costs, financing costs, bond administrative expenses,
and other costs authorized by the financing order:
(A) imposed on and included in customer bills of a gas
utility that has received a regulatory asset determination under
Section 104.365;
(B) collected in full by a gas utility that has
received a regulatory asset determination under Section 104.365, or
its successors or assignees, or a collection agent, as servicer,
separate and apart from the gas utility's base rates; and
(C) paid by all existing or future customers receiving
service from a gas utility that has received a regulatory asset
determination under Section 104.365 or its successors or assignees,

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even if a customer elects to purchase gas from an alternative gas

supplier.
(8) "Customer rate relief property" means:
(A) all rights and interests of an issuing financing
entity or any successor under a financing order, including the right
to impose, bill, collect, and receive customer rate relief charges
authorized in the financing order and to obtain periodic adjustments
to those customer rate relief charges as provided in the financing
order and in accordance with Section 104.370; and
(B) all revenues, collections, claims, rights to
payments, payments, money, or proceeds arising from the rights and
interests specified by Paragraph (A), regardless of whether the
revenues, collections, claims, rights to payments, payments, money,
or proceeds are imposed, billed, received, collected, or maintained
together with or commingled with other revenues, collections, rights
to payments, payments, money, or proceeds.
(9) "Financing costs" means any of the following:
(A) interest and acquisition, defeasance, or redemption
premiums that are payable on customer rate relief bonds;
(B) a payment required under an ancillary agreement or
credit agreement or an amount required to fund or replenish reserve
or other accounts established under the terms of an indenture,
ancillary agreement, or other financing document pertaining to
customer rate relief bonds;
(C) issuance costs or ongoing costs related to
supporting, repaying, servicing, or refunding customer rate relief
bonds, including servicing fees, accounting or auditing fees, trustee
fees, legal fees or expenses, consulting fees, administrative fees,
printing fees, financial advisor fees or expenses, Securities and
Exchange Commission registration fees, issuer fees, bond
administrative expenses, placement and underwriting fees, capitalized
interest, overcollateralization funding requirements including
amounts to fund or replenish any reserve established for a series of
customer rate relief bonds, rating agency fees, stock exchange
listing and compliance fees, filing fees, and any other bond
administrative expenses; and
(D) the costs to the railroad commission of acquiring
professional or consulting services for the purpose of evaluating
extraordinary costs under this subchapter.
(10) "Financing order" means an order adopted under Section

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104.366 approving the issuance of customer rate relief bonds and the
creation of customer rate relief property and associated customer
rate relief charges for the recovery of regulatory assets, including
extraordinary costs, related financing costs, and other costs
authorized by the financing order.
(11) "Financing party" means a holder of customer rate
relief bonds, including a trustee, a pledgee, a collateral agent, any
party under an ancillary agreement, or other person acting for the
holder's benefit.
(12) "Gas utility" means:
(A) an operator of natural gas distribution pipelines
that delivers and sells natural gas to the public and that is subject
to the railroad commission's jurisdiction under Section 102.001; or
(B) an operator that transmits, transports, delivers,
or sells natural gas or synthetic natural gas to operators of natural
gas distribution pipelines and whose rates for those services are
established by the railroad commission in a rate proceeding filed
under this chapter.
(13) "Issuing financing entity" means a special purpose
nonmember, nonstock, nonprofit public corporation established by the
authority under Section 1232.1072, Government Code.
(14) "Nonbypassable" means a charge that:
(A) must be paid by all existing or future customers
receiving service from a gas utility that has received a regulatory
asset determination under Section 104.365 or the gas utility's
successors or assignees, even if a customer elects to purchase gas
from an alternative gas supplier; and
(B) may not be offset by any credit.
(15) "Normalized market pricing" means the average monthly
pricing at the Henry Hub for the three months immediately preceding
the month during which extraordinary costs were incurred, plus
contractual adders to the index price and other non-indexed gas
procurement costs.
(16) "Regulatory asset" includes extraordinary costs:
(A) recorded by a gas utility in the utility's books
and records in accordance with the uniform system of accounts
prescribed for natural gas companies subject to the provisions of the
Natural Gas Act (15 U.S.C. Section 717 et seq.) by the Federal Energy
Regulatory Commission and generally accepted accounting principles;
or

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(B) classified as a receivable or financial asset under

international financial reporting standards under the railroad
commission's authorization in the Notice of Authorization for
Regulatory Asset Accounting for Local Distribution Companies Affected
by the February 2021 Winter Weather Event issued February 13, 2021.
(17) "Servicer" means, with respect to each issuance of
customer rate relief bonds, the entity identified by the railroad
commission in the financing order as servicer responsible for
collecting customer rate relief charges from participating gas
utilities, remitting all collected funds to the applicable issuing
financing entity or the bond trustee, calculating true-up
adjustments, and performing any other duties as specified in the
financing order.
(18) "Winter Storm Uri" means the North American winter
storm that occurred in February 2021.

Added by Acts 2021, 87th Leg., R.S., Ch. 805 (H.B. 1520), Sec. 5, eff.
June 16, 2021.

Sec. 104.363. EXTRAORDINARY COSTS. For the purposes of this

subchapter, extraordinary costs are the reasonable and necessary
costs related to Winter Storm Uri, including carrying costs, placed
in a regulatory asset and approved by the railroad commission in a
regulatory asset determination under Section 104.365.

Added by Acts 2021, 87th Leg., R.S., Ch. 805 (H.B. 1520), Sec. 5, eff.
June 16, 2021.

Sec. 104.364. JURISDICTION AND POWERS OF RAILROAD COMMISSION

AND OTHER REGULATORY AUTHORITIES. (a) The railroad commission may
authorize the issuance of customer rate relief bonds if the
requirements of Section 104.366 are met.
(b) The railroad commission may assess to a gas utility costs
associated with administering this subchapter. Assessments must be
recovered from rate-regulated customers as part of gas cost.
(c) The railroad commission has exclusive, original
jurisdiction to issue financing orders that authorize the creation of
customer rate relief property. Customer rate relief property must be
created and vested in an issuing financing entity and does not

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constitute property of the railroad commission or any gas utility.

(d) Except as provided by Subsection (c), this subchapter does
not limit or impair a regulatory authority's plenary jurisdiction
over the rates, charges, and services rendered by gas utilities in
this state under Chapter 102.

Added by Acts 2021, 87th Leg., R.S., Ch. 805 (H.B. 1520), Sec. 5, eff.
June 16, 2021.

Sec. 104.365. REGULATORY ASSET DETERMINATION. (a) The

railroad commission, on application of a gas utility to recover a
regulatory asset, shall determine the regulatory asset amount to be
recovered by the gas utility. A gas utility may request recovery of
a regulatory asset under this subchapter only if the regulatory asset
is related to Winter Storm Uri.
(b) A gas utility desiring to participate in the customer rate
relief bond process under a financing order by requesting recovery of
a regulatory asset must file an application with the railroad
commission on or before the 60th day after the effective date of the
Act enacting this subchapter.
(c) If the railroad commission does not make a final
determination regarding the regulatory asset amount to be recovered
by a gas utility before the 151st day after the gas utility files the
application, the railroad commission is considered to have approved
the regulatory asset amount requested by the gas utility.
(d) The regulatory asset determination is not subject to
reduction, impairment, or adjustment by further action of the
railroad commission, except as authorized by Section 104.370.
(e) The regulatory asset determination is not subject to
rehearing by the railroad commission and may be appealed only to a
Travis County district court by a party to the proceeding. The
appeal must be filed not later than the 15th day after the date the
order is signed by the railroad commission.
(f) The judgment of the district court may be reviewed only by
direct appeal to the Supreme Court of Texas. The appeal must be
filed not later than the 15th day after the date of entry of
judgment.
(g) All appeals shall be heard and determined by the district
court and the Supreme Court of Texas as expeditiously as possible

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with lawful precedence over other matters. Review on appeal shall be

based solely on the record before the railroad commission and briefs
to the court and limited to whether the financing order:
(1) complies with the constitution and laws of this state
and the United States; and
(2) is within the authority of the railroad commission to
issue under this subchapter.
(h) The railroad commission shall establish a schedule, filing
requirements, and a procedure for determining the prudence of the
costs included in a gas utility's regulatory asset.
(i) To the extent a gas utility subject to this subchapter
receives insurance proceeds, governmental grants, or other sources of
funding that compensate or otherwise reimburse or indemnify the gas
utility for extraordinary costs following the issuance of customer
rate relief bonds, the gas utility may record the amount in a
regulatory liability account and that amount shall be reviewed in a
future proceeding. If an audit conducted under a valid gas purchase
agreement identifies a change of greater than five percent to the
total amount of the gas supply costs incurred during the event for
which regulatory asset recovery was approved, the gas utility may
record the amount in a regulatory asset or regulatory liability
account and that amount shall be reviewed for recovery in a future
proceeding.

Added by Acts 2021, 87th Leg., R.S., Ch. 805 (H.B. 1520), Sec. 5, eff.
June 16, 2021.

Sec. 104.366. FINANCING ORDERS AND ISSUANCE OF CUSTOMER RATE

RELIEF BONDS. (a) If the railroad commission determines that
customer rate relief bond financing for extraordinary costs is the
most cost-effective method of funding regulatory asset reimbursements
to be made to gas utilities, the railroad commission, after the final
resolution of all applications filed under Section 104.365, may
request the authority to direct an issuing financing entity to issue
customer rate relief bonds. Before making the request, the railroad
commission must issue a financing order that complies with this
section.
(b) To make the determination described by Subsection (a), the
railroad commission must find that the proposed structuring, expected

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pricing, and proposed financing costs of the customer rate relief

bonds are reasonably expected to provide benefits to customers by:
(1) considering customer affordability; and
(2) comparing:
(A) the estimated monthly costs to customers resulting
from the issuance of customer rate relief bonds; and
(B) the estimated monthly costs to customers that would
result from the application of conventional recovery methods.
(c) The financing order must:
(1) include a finding that the use of the securitization
financing mechanism is in the public interest and consistent with the
purposes of this subchapter;
(2) detail the total amount of the regulatory asset
determinations to be included in the customer rate relief bond
issuance;
(3) authorize the recovery of any tax obligation of the gas
utilities arising or resulting from:
(A) receipt of customer rate relief bond proceeds; or
(B) collection or remittance of customer rate relief
charges through the gas utilities' gas cost recovery mechanism or
other means that the railroad commission determines reasonable;
(4) authorize the issuance of customer rate relief bonds
through an issuing financing entity;
(5) include a statement of:
(A) the aggregated regulatory asset determination to be
included in the principal amount of the customer rate relief bonds,
not to exceed $10 billion for any separate bond issue;
(B) the maximum scheduled final maturity of the
customer rate relief bonds, not to exceed 30 years, except that the
legal final maturity may be longer based on rating agency and market
considerations; and
(C) the maximum interest rate that the customer rate
relief bonds may bear, not to exceed the maximum net effective
interest rate allowed by law;
(6) provide for the imposition, collection, and mandatory
periodic formulaic adjustment of customer rate relief charges in
accordance with Section 104.370 by all gas utilities and successors
of gas utilities for which a regulatory asset determination has been
made under Section 104.365 to ensure that the customer rate relief
bonds and all related financing costs will be paid in full and on a

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timely basis by customer rate relief charges;

(7) authorize the creation of customer rate relief property
in favor of the issuing financing entity and pledge of customer rate
relief property to the payment of the customer rate relief bonds;
(8) direct the issuing financing entity to disperse the
proceeds of customer rate relief bonds, net of bond issuance costs,
reserves, and any capitalized interest, to gas utilities for which a
regulatory asset determination has been made under Section 104.365
and include the amounts to be distributed to each participating gas
utility;
(9) provide that customer rate relief charges be collected
and allocated among customers of each gas utility for which a
regulatory determination has been made under Section 104.365 through
uniform monthly volumetric charges to be paid by customers as a
component of the gas utility's gas cost or in another manner that the
railroad commission determines reasonable; and
(10) reflect the commitment made by a gas utility receiving
proceeds that the proceeds are in lieu of recovery of those costs
through the regular ratemaking process or other mechanism to the
extent the costs are reimbursed to the gas utility by customer rate
relief bond financing proceeds.
(d) The financing order may provide for a centralized servicer
to coordinate with participating gas utilities who bill and collect
customer rate relief charges and to provide certain collection and
forecast data required for calculating true-up adjustments. The
financing order may not provide for the railroad commission, the
authority, the issuing financing entity, or a participating utility
to act as servicer.
(e) The principal amount determined by the railroad commission
must be increased to include an amount sufficient to:
(1) pay the financing costs associated with the issuance,
including all bond administrative expenses to be paid from the
proceeds of the bonds;
(2) reimburse the authority and the railroad commission for
any costs incurred for the issuance of the customer rate relief bonds
and related bond administrative expenses;
(3) provide for any applicable bond reserve fund; and
(4) capitalize interest for the period determined necessary
by the railroad commission.
(f) The authority, consistent with this subchapter and the

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terms of the financing order, shall:

(1) direct an issuing financing entity to issue customer
rate relief bonds at the railroad commission's request, in accordance
with the requirements of Chapter 1232, Government Code, and other
provisions of Title 9, Government Code, that apply to bond issuance
by a state agency;
(2) determine the methods of sale, types of bonds, bond
forms, interest rates, principal amortization, amount of reserves or
capitalized interest, and other terms of the customer rate relief
bonds that in the authority's judgment best achieve the economic
goals of the financing order and effect the financing at the lowest
practicable cost; and
(3) reimburse the railroad commission, the authority, or
any issuing financing entity for bond administrative expenses and
other costs authorized under this subchapter.
(g) To the extent authorized in the applicable financing order,
an issuing financing entity may enter into credit agreements or
ancillary agreements in connection with the issuance of customer rate
relief bonds.
(h) The financing order becomes effective in accordance with
its terms. The financing order, together with the customer rate
relief property and the customer rate relief charges authorized by
the financing order, is irrevocable and not subject to reduction,
impairment, or adjustment by further action of the railroad
commission, except as provided under Subsection (j) and authorized by
Section 104.370.
(i) The railroad commission shall issue a financing order under
this section not later than the 90th day following the date of the
conclusion of all proceedings filed under Section 104.365.
(j) A financing order is not subject to rehearing by the
railroad commission. A financing order may be appealed only to a
Travis County district court by a party to the proceeding. The
appeal must be filed not later than the 15th day after the date the
financing order is signed by the railroad commission.
(k) The judgment of the district court may be reviewed only by
direct appeal to the Supreme Court of Texas. The appeal must be
filed not later than the 15th day after the date of entry of
judgment.
(l) All appeals shall be heard and determined by the district
court and the Supreme Court of Texas as expeditiously as possible

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 UTILITIES CODE

with lawful precedence over other matters. Review on appeal shall be

based solely on the record before the railroad commission and briefs
to the court and is limited to whether the financing order:
(1) complies with the constitution and laws of this state
and the United States; and
(2) is within the authority of the railroad commission to
issue under this subchapter.
(m) The railroad commission shall transmit a financing order to
the authority after all appeals under this section have been
exhausted.
(n) The authority shall direct an issuing financing entity to
issue customer rate relief bonds as soon as practicable and not later
than the 180th day after receipt of a financing order issued under
this section, except that the authority may cause the issuance after
the 180th day if necessary based on bond market conditions, the
receipt of necessary approvals, and the timely receipt of necessary
financial disclosure information from each participating gas utility.
(o) The issuing financing entity shall deliver customer rate
relief bond proceeds net of upfront financing costs in accordance
with the applicable financing order.
(p) For the benefit of the authority, the issuing financing
entity, holders of customer rate relief bonds, and all other
financing parties, the railroad commission shall guarantee in a
financing order that the railroad commission will take all actions in
the railroad commission's powers to enforce the provisions of the
financing order to ensure that customer rate relief charge revenues
are sufficient to pay on a timely basis scheduled principal and
interest on the customer rate relief bonds and all related financing
costs and bond administrative expenses.
(q) The railroad commission shall make periodic reports to the
public regarding each financing.

Added by Acts 2021, 87th Leg., R.S., Ch. 805 (H.B. 1520), Sec. 5, eff.
June 16, 2021.

Sec. 104.367. PROPERTY RIGHTS. (a) Customer rate relief bonds

are the limited obligation solely of the issuing financing entity and
are not a debt of a gas utility or a debt or a pledge of the faith
and credit of this state or any political subdivision of this state.

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 UTILITIES CODE

(b) Customer rate relief bonds are nonrecourse to the credit or

any assets of this state or the authority. A trust fund created in
connection with the issuance of customer rate relief bonds is not
subject to Subtitle B, Title 9, Property Code.
(c) The rights and interests of an issuing financing entity or
the successor under a financing order, including the right to receive
customer rate relief charges authorized in the financing order, are
only contract rights until pledged in connection with the issuance of
the customer rate relief bonds, at which time the rights and
interests become customer rate relief property.
(d) Customer rate relief property created under a financing
order is vested ab initio in the issuing financing entity. Customer
rate relief property constitutes a present property right for
purposes of contracts concerning the sale or pledge of property,
notwithstanding that the imposition and collection of customer rate
relief charges depends on further acts of the gas utility or others
that have not yet occurred. The financing order remains in effect,
and the customer rate relief property continues to exist, for the
same period as the pledge of the state described by Section 104.374.
(e) All revenue and collections resulting from customer rate
relief charges constitute proceeds only of a property right arising
from the financing order.
(f) An amount owed by an issuing financing entity under an
ancillary agreement or a credit agreement is payable from and secured
by a pledge and interest in the customer rate relief property to the
extent provided in the documents evidencing the ancillary agreement
or credit agreement.

Added by Acts 2021, 87th Leg., R.S., Ch. 805 (H.B. 1520), Sec. 5, eff.
June 16, 2021.

Sec. 104.368. PROPERTY INTEREST NOT SUBJECT TO SETOFF,

COUNTERCLAIM, SURCHARGE, OR DEFENSE. The interest of an issuing
financing entity or pledgee in customer rate relief property,
including the revenue and collections arising from customer rate
relief charges, is not subject to setoff, counterclaim, surcharge, or
defense by the gas utility or any other person or in connection with
the bankruptcy of the gas utility, the authority, or any other
entity. A financing order remains in effect and unabated

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 UTILITIES CODE

notwithstanding the bankruptcy of the gas utility, the authority, an

issuing financing entity, or any successor or assignee of the gas
utility, authority, or issuing financing entity.

Added by Acts 2021, 87th Leg., R.S., Ch. 805 (H.B. 1520), Sec. 5, eff.
June 16, 2021.

Sec. 104.369. CUSTOMER RATE RELIEF CHARGES NONBYPASSABLE. A

financing order must include terms ensuring that the imposition and
collection of the customer rate relief charges authorized in the
order are nonbypassable.

Added by Acts 2021, 87th Leg., R.S., Ch. 805 (H.B. 1520), Sec. 5, eff.
June 16, 2021.

Sec. 104.370. TRUE-UP MECHANISM. (a) A financing order must

include a formulaic true-up charge adjustment mechanism that requires
that the customer rate relief charges be reviewed and adjusted at
least annually by the servicer or replacement servicer, including a
subservicer or replacement subservicer, at time periods and
frequencies provided in the financing order, to:
(1) correct any overcollections or undercollections of the
preceding 12 months; and
(2) ensure the expected recovery of amounts sufficient to
provide for the timely payment of customer rate relief bond principal
and interest payments and other financing costs.
(b) True-up charge adjustments must become effective not later
than the 30th day after the date the railroad commission receives a
true-up charge adjustment letter from the servicer or replacement
servicer notifying the railroad commission of the pending adjustment.
(c) Any administrative review of true-up charge adjustments
must be limited to notifying the servicer of mathematical or clerical
errors in the calculation. The servicer may correct the error and
refile a true-up charge adjustment letter, with the adjustment
becoming effective as soon as practicable but not later than the 30th
day after the date the railroad commission receives the refiled
letter.

Added by Acts 2021, 87th Leg., R.S., Ch. 805 (H.B. 1520), Sec. 5, eff.

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 UTILITIES CODE

June 16, 2021.

Sec. 104.371. SECURITY INTERESTS; ASSIGNMENT; COMMINGLING;

DEFAULT. (a) Customer rate relief property does not constitute an
account or general intangible under Section 9.106, Business &
Commerce Code. The creation, granting, perfection, and enforcement
of liens and security interests in customer rate relief property that
secures customer rate relief bonds are governed by Chapter 1208,
Government Code.
(b) The priority of a lien and security interest perfected
under this section is not impaired by any later adjustment of
customer rate relief charges under a mechanism adopted under Section
104.370 or by the commingling of funds arising from customer rate
relief charges with other funds. Any other security interest that
may apply to those funds is terminated when the funds are transferred
to a segregated account for the issuing financing entity or a
financing party. If customer rate relief property has been
transferred to a trustee or another pledgee of the issuing financing
entity, any proceeds of that property must be held in trust for the
financing party.
(c) If a default or termination occurs under the customer rate
relief bonds, a district court of Travis County, on application by or
on behalf of the financing parties, shall order the sequestration and
payment to the financing parties of revenue arising from the customer
rate relief charges.

Added by Acts 2021, 87th Leg., R.S., Ch. 805 (H.B. 1520), Sec. 5, eff.
June 16, 2021.

Sec. 104.372. BOND PROCEEDS IN TRUST. (a) The issuing

financing entity may deposit proceeds of customer rate relief bonds
issued by the issuing financing entity under this subchapter with a
trustee selected by the issuing financing entity or the proceeds may
be held by the comptroller in a dedicated trust fund outside the
state treasury in the custody of the comptroller.
(b) Bond proceeds, net of the financing costs and reserves
described by Subdivisions (2) and (3), including investment income,
must be held in trust for the exclusive benefit of the railroad

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commission's policy of reimbursing gas utility costs and applied in

accordance with the financing order. The issuing financing entity
shall deliver the net proceeds, as provided in the applicable
financing order, to:
(1) reimburse each gas utility the regulatory asset amount
determined to be reasonable for that gas utility in the financing
order;
(2) pay the financing costs of issuing the bonds; and
(3) provide bond reserves or fund any capitalized interest,
as applicable.
(c) On full payment of the customer rate relief bonds and any
related financing costs, any customer rate relief charges or other
amounts held as security for the bonds shall be used to provide
credits to gas utility customers as provided in the financing order.

Added by Acts 2021, 87th Leg., R.S., Ch. 805 (H.B. 1520), Sec. 5, eff.
June 16, 2021.

Sec. 104.373. REPAYMENT OF CUSTOMER RATE RELIEF BONDS. (a) As

long as any customer rate relief bonds or related financing costs
remain outstanding, uniform monthly volumetric customer rate relief
charges must be paid by all current and future customers that receive
service from a gas utility for which a regulatory asset determination
has been made under Section 104.365. A gas utility and its
successors, assignees, or replacements shall continue to bill and
collect customer rate relief charges from the gas utility's current
and future customers until all customer rate relief bonds and
financing costs are paid in full.
(b) The authority shall report to the railroad commission the
amount of the outstanding customer rate relief bonds issued by the
issuing financing entity under this subchapter and the estimated
amount of annual bond administrative expenses.
(c) All revenue collected from the customer rate relief charges
shall be remitted promptly by the applicable servicers to the issuing
financing entity or the bond trustee for the customer rate relief
bonds to pay bond obligations and ongoing financing costs, including
bond administrative expenses, to ensure timely payment of bond
obligations and financing costs.
(d) Customer rate relief property, including customer rate

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 UTILITIES CODE

relief charges, may be applied only as provided by this subchapter.

(e) Bond obligations are payable only from sources provided for
payment by this subchapter.

Added by Acts 2021, 87th Leg., R.S., Ch. 805 (H.B. 1520), Sec. 5, eff.
June 16, 2021.

Sec. 104.374. PLEDGE OF STATE. (a) Customer rate relief bonds

issued under this subchapter and any related ancillary agreements or
credit agreements are not a debt or pledge of the faith and credit of
this state or a state agency or political subdivision of this state.
A customer rate relief bond, ancillary agreement, or credit agreement
is payable solely from customer rate relief charges as provided by
this subchapter.
(b) Notwithstanding Subsection (a), this state, including the
railroad commission and the authority, pledges for the benefit and
protection of the financing parties and the gas utility that this
state will not take or permit any action that would impair the value
of customer rate relief property, or, except as permitted by Section
104.370, reduce, alter, or impair the customer rate relief charges to
be imposed, collected, and remitted to financing parties until the
principal, interest and premium, and contracts to be performed in
connection with the related customer rate relief bonds and financing
costs have been paid and performed in full. Each issuing financing
entity shall include this pledge in any documentation relating to
customer rate relief bonds.
(c) Before the date that is two years and one day after the
date that an issuing financing entity no longer has any payment
obligation with respect to customer rate relief bonds, the issuing
financing entity may not wind up or dissolve the financing entity's
operations, may not file a voluntary petition under federal
bankruptcy law, and neither the board of the issuing financing entity
nor any public official nor any organization, entity, or other person
may authorize the issuing financing entity to be or to become a
debtor under federal bankruptcy law during that period. The state
covenants that it will not limit or alter the denial of authority
under this subsection, and the provisions of this subsection are
hereby made a part of the contractual obligation that is subject to
the state pledge made in this section.

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Added by Acts 2021, 87th Leg., R.S., Ch. 805 (H.B. 1520), Sec. 5, eff.
June 16, 2021.

Sec. 104.375. TAX EXEMPTION. (a) The sale or purchase of or

revenue derived from services performed in the issuance or transfer
of customer rate relief bonds issued under this subchapter is exempt
from taxation by this state or a political subdivision of this state.
(b) A gas utility's receipt of customer rate relief charges is
exempt from state and local sales and use taxes and utility gross
receipts taxes and assessments, and is excluded from revenue for
purposes of franchise tax under Section 171.1011, Tax Code.

Added by Acts 2021, 87th Leg., R.S., Ch. 805 (H.B. 1520), Sec. 5, eff.
June 16, 2021.

Sec. 104.376. RECOVERABLE TAX EXPENSE. A tax obligation of the

gas utility arising from receipt of customer rate relief bond
proceeds or from the collection or remittance of customer rate relief
charges is an allowable expense under Section 104.055.

Added by Acts 2021, 87th Leg., R.S., Ch. 805 (H.B. 1520), Sec. 5, eff.
June 16, 2021.

Sec. 104.377. ISSUING FINANCING ENTITY OR FINANCING PARTY NOT

PUBLIC UTILITY. An issuing financing entity or financing party may
not be considered to be a public utility or person providing natural
gas service solely by virtue of the transactions described by this
subchapter.

Added by Acts 2021, 87th Leg., R.S., Ch. 805 (H.B. 1520), Sec. 5, eff.
June 16, 2021.

Sec. 104.378. NO PERSONAL LIABILITY. A commissioner of the

railroad commission, a railroad commission employee, a member of the
board of directors of the authority, an employee of the authority, or
a director, officer, or employee of any issuing financing entity is
not personally liable for a result of an exercise of a duty or

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responsibility established under this subchapter.

Added by Acts 2021, 87th Leg., R.S., Ch. 805 (H.B. 1520), Sec. 5, eff.
June 16, 2021.

Sec. 104.380. SEVERABILITY. After the date customer rate

relief bonds are issued under this subchapter, if any provision in
this title or portion of this title or related provisions in Title 9,
Government Code, are held to be invalid or are invalidated,
superseded, replaced, repealed, or expire for any reason, that
occurrence does not affect the validity or continuation of this
subchapter or any other provision of this title or related provisions
in Title 9, Government Code, that are relevant to the issuance,
administration, payment, retirement, or refunding of customer rate
relief bonds or to any actions of a gas utility, its successors, an
assignee, a collection agent, or a financing party, which shall
remain in full force and effect.

Added by Acts 2021, 87th Leg., R.S., Ch. 805 (H.B. 1520), Sec. 5, eff.
June 16, 2021.

SUBCHAPTER J. NATURAL GAS ENERGY CONSERVATION PROGRAMS

Sec. 104.401. DEFINITIONS. In this subchapter:
(1) "Energy conservation program" means a program that
promotes energy conservation or energy efficiency.
(2) "Local distribution company" means a gas utility that
operates a retail gas distribution system.

Added by Acts 2023, 88th Leg., R.S., Ch. 710 (H.B. 2263), Sec. 1, eff.
June 12, 2023.

Sec. 104.402. ENERGY CONSERVATION PROGRAM AUTHORITY. (a) A

local distribution company may offer to customers and prospective
customers and provide to customers an energy conservation program in
the manner provided by this subchapter.
(b) The railroad commission has exclusive original jurisdiction
over energy conservation programs implemented by local distribution
companies.

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(c) A political subdivision served by a local distribution

company that implements an energy conservation program approved by
the railroad commission under this subchapter may not limit,
restrict, or otherwise prevent an eligible customer from
participating in the energy conservation program based on the type or
source of energy delivered to the customer.

Added by Acts 2023, 88th Leg., R.S., Ch. 710 (H.B. 2263), Sec. 1, eff.
June 12, 2023.

Sec. 104.403. ENERGY CONSERVATION PROGRAM COST RECOVERY. (a)

A local distribution company may recover costs of energy conservation
programs implemented under this subchapter if approved by the
railroad commission in the manner provided by this subchapter. A
local distribution company seeking to recover the costs must apply to
the railroad commission before beginning recovery of the costs and at
least once every three years after the date the company first applies
for the cost recovery.
(b) If the railroad commission approves the local distribution
company's application or approves the application with modifications,
the company may recover costs prudently incurred to implement the
energy conservation programs, including costs incurred to design,
market, implement, administer, and deliver an energy conservation
program.
(c) If the local distribution company provides an earnings
monitoring report for the preceding calendar year demonstrating that
the company did not earn above the rate of return established in the
latest effective rates approved by the railroad commission for the
company, the railroad commission may allow the company to recover an
amount equal to the reduction in the company's marginal revenues due
to lower sales or demand resulting from the energy conservation
program.
(d) The railroad commission by rule shall require a local
distribution company that implements an energy conservation program
under this subchapter to submit to the railroad commission an annual
report on:
(1) the performance of the company's energy conservation
programs for the preceding year; and
(2) the company's planned energy conservation programs for

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the upcoming year.

(e) An application for cost recovery under Subsection (a) must
include:
(1) a summary of and objectives for the local distribution
company's energy conservation programs;
(2) a description of each program;
(3) a proposed budget for each program;
(4) the projected consumption reduction or cost savings for
each program; and
(5) any public input compiled by the local distribution
company on the proposed programs as required by the railroad
commission.
(f) The railroad commission by rule may:
(1) determine a cost recovery mechanism for timely recovery
of costs described by Subsection (a); and
(2) ensure that costs described by Subsection (a) are
allocated to the customer classes eligible for participation in the
energy conservation program.
(g) Energy conservation programs proposed under this section
may be combined in a portfolio to provide incentives and services to
encourage energy conservation. The portfolio:
(1) must be designed to overcome barriers to the adoption
of energy-efficient equipment, technologies, and processes and be
designed to change customer behavior as necessary; and
(2) may include measures such as:
(A) direct financial incentives;
(B) technical assistance and information, including
building energy performance analyses performed by the local
distribution company or a third party approved by the company;
(C) discounts or rebates for products; and
(D) weatherization for low-income customers.
(h) A proceeding filed under this section is not a ratemaking
proceeding for the purposes of Section 103.022.
(i) A local distribution company implementing an energy
conservation program under this subchapter shall reimburse the
railroad commission for the utility's proportionate share of the
railroad commission's costs related to administration of reviewing
and approving or denying cost recovery applications under this
subchapter.

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Added by Acts 2023, 88th Leg., R.S., Ch. 710 (H.B. 2263), Sec. 1, eff.
June 12, 2023.

CHAPTER 105. JUDICIAL REVIEW; ENFORCEMENT AND PENALTIES

SUBCHAPTER A. JUDICIAL REVIEW
Sec. 105.001. RIGHT TO JUDICIAL REVIEW. (a) Any party to a
proceeding before the railroad commission is entitled to judicial
review under the substantial evidence rule.
(b) The issue of confiscation is determined by a preponderance
of the evidence.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 105.002. JUDICIAL STAY OR SUSPENSION. While an appeal of

an order, ruling, or decision of a regulatory authority is pending,
the district court, court of appeals, or supreme court, as
appropriate, may stay or suspend all or part of the operation of the
order, ruling, or decision. In granting or refusing a stay or
suspension, the court shall act in accordance with the practice of a
court exercising equity jurisdiction.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER B. ENFORCEMENT AND PENALTIES

Sec. 105.021. ACTION TO ENJOIN OR REQUIRE COMPLIANCE. (a) The
attorney general, on the request of the railroad commission, shall
apply in the name of the commission for an order under Subsection (b)
if the commission determines that a gas utility or other person is:
(1) engaging in or about to engage in an act that violates
this subtitle or an order or rule of the commission entered or
adopted under this subtitle; or
(2) failing to comply with the requirements of this
subtitle or a rule or order of the commission.
(b) A court, in an action under this section, may:
(1) prohibit the commencement or continuation of an act
that violates this subtitle or an order or rule of the commission
entered or adopted under this subtitle; or
(2) require compliance with a provision of this subtitle or

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an order or rule of the commission.

(c) The remedy under this section is in addition to any other
remedy provided under this subtitle.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 105.022. CONTEMPT. The railroad commission may file an

action for contempt against a person who:
(1) fails to comply with a lawful order of the commission;
(2) fails to comply with a subpoena or subpoena duces
tecum; or
(3) refuses to testify about a matter on which the person
may be lawfully interrogated.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 105.023. CIVIL PENALTY AGAINST GAS UTILITY OR AFFILIATE.

(a) A gas utility or affiliate is subject to a civil penalty if the
gas utility or affiliate knowingly violates this subtitle, fails to
perform a duty imposed on it, or fails, neglects, or refuses to obey
an order, rule, direction, or requirement of the railroad commission
or a decree or judgment of a court.
(b) A civil penalty under this section shall be in an amount of
not less than $1,000 and not more than $5,000 for each violation.
(b-1) Notwithstanding Subsection (b), a civil penalty under
this section shall be in an amount of not less than $1,000 and not
more than $1,000,000 for each violation of Section 104.258(c).
(c) A gas utility or affiliate commits a separate violation
each day it continues to violate Subsection (a).
(d) The attorney general shall file in the name of the railroad
commission a suit on the attorney general's own initiative or at the
request of the commission to recover the civil penalty under this
section.
(e) The railroad commission by rule shall establish a
classification system to be used by a court under this subchapter for
violations of Section 104.258(c) that includes a range of penalties
that may be recovered for each class of violation based on:
(1) the seriousness of the violation, including:
(A) the nature, circumstances, extent, and gravity of a

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prohibited act; and

(B) the hazard or potential hazard created to the
health, safety, or economic welfare of the public;
(2) the history of previous violations;
(3) the amount necessary to deter future violations;
(4) efforts to correct the violation; and
(5) any other matter that justice may require.
(f) The classification system established under Subsection (e)
shall provide that a penalty in an amount that exceeds $5,000 may be
recovered only if the violation is included in the highest class of
violations in the classification system.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2021, 87th Leg., R.S., Ch. 426 (S.B. 3), Sec. 20, eff. June
8, 2021.

Sec. 105.024. OFFENSE. (a) A person commits an offense if the

person knowingly violates this subtitle.
(b) An offense under this section is a felony of the third
degree.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 105.025. PLACE FOR SUIT. A suit for an injunction or a

penalty under this subtitle may be brought in:
(1) Travis County;
(2) a county in which the violation is alleged to have
occurred; or
(3) a county in which a defendant resides.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 105.026. PENALTIES CUMULATIVE. (a) A penalty that

accrues under this subtitle is cumulative of any other penalty.
(b) A suit for the recovery of a penalty does not bar or affect
the recovery of any other penalty or bar a criminal prosecution
against any person, including a gas utility or officer, director,

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agent, or employee of a gas utility.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 105.027. DISPOSITION OF FINES AND PENALTIES. A fine or

penalty collected under this subtitle, other than a fine or penalty
collected in a criminal proceeding, shall be paid to the railroad
commission.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER C. COMPLAINTS
Sec. 105.051. COMPLAINT BY AFFECTED PERSON. An affected person
may complain to the regulatory authority in writing setting forth an
act or omission by a gas utility in violation or claimed violation of
a law that the regulatory authority has jurisdiction to administer or
of an order, ordinance, or rule of the regulatory authority.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBTITLE B. REGULATION OF TRANSPORTATION AND USE

CHAPTER 121. GAS PIPELINES
SUBCHAPTER A. GAS UTILITY DEFINED
Sec. 121.001. DEFINITION OF GAS UTILITY. (a) In this chapter,
"gas utility" means a person who owns, manages, operates, leases, or
controls in this state property or equipment or a pipeline, plant,
facility, franchise, license, or permit for a business that:
(1) transports, conveys, distributes, or delivers natural
gas:
(A) for public use or service for compensation;
(B) for sale to municipalities or persons engaged in
distributing or selling natural gas to the public, in a situation
described by Subdivision (3);
(C) for sale or delivery to a person operating under a
franchise or contract with a political subdivision of this state; or
(D) for sale or delivery to the public for domestic or
other use;
(2) owns, operates, or manages a pipeline:

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 UTILITIES CODE

(A) that is for transporting or carrying natural gas,

whether for public hire or not; and
(B) for which the right-of-way has been or is hereafter
acquired by exercising the right of eminent domain; or
(3) produces or purchases natural gas and transports or
causes the transportation of natural gas by a pipeline to or near the
limits of a municipality in which the gas is received and distributed
or sold to the public by another gas utility or by the municipality
in a situation in which the business is the only or practically the
only agency of supply of natural gas to the gas utility or
municipality.
(b) In this subchapter, "person" means an individual, company,
limited liability company, or private corporation and includes a
lessee, trustee, or receiver of an individual, company, limited
liability company, or private corporation.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 11, Sec. 2, eff. May 3, 1999.

Sec. 121.002. AFFILIATE OF GAS UTILITY EXCLUDED. A person is

not a gas utility solely because the person is an affiliate of a gas
utility.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 121.003. AGRICULTURAL SERVICE EXCLUDED. (a) The act or

acts of transporting, delivering, selling, or otherwise making
available natural gas for fuel, either directly or indirectly, to an
owner of an irrigation well, or the sale, transportation, or delivery
of natural gas for any other direct use in an agricultural activity,
does not make a person a gas utility or make the person subject to
the jurisdiction, control, and regulation of the railroad commission
as a gas utility.
(b) In order for a person furnishing natural gas to qualify for
the exemption under Subsection (a), the person to whom the gas was
furnished under Subsection (a) shall use the gas exclusively to pump
water for farm and other agricultural purposes.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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Sec. 121.004. TRANSPORTATION OF GAS SOLELY FOR INTERSTATE

COMMERCE EXCLUDED. Except as provided by Section 121.001(a)(2), a
person is not a gas utility if the person certifies to the railroad
commission that the person transports natural or synthetic gas, for
sale, for hire, or otherwise, solely in, or in the vicinity of, the
field or fields where the gas is produced, to another person for
transportation or sale in interstate commerce.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 121.005. TRANSPORTATION OF GAS IN VICINITY OF PLACE OF

PRODUCTION EXCLUDED. (a) Except as provided by Section
121.001(a)(2), a person is not a gas utility if the person certifies
to the railroad commission that the person transports natural or
synthetic gas, for sale, for hire, or otherwise, solely:
(1) in, or in the vicinity of, the field or fields where
the gas is produced to a gas processing plant or treating facility;
(2) from the outlet of a gas processing plant or treating
facility described by Subdivision (1) to a person:
(A) at, or in the vicinity of, the plant or treating
facility; or
(B) described by Subdivision (3) or Section 121.004;
or
(3) to another person in, or in the vicinity of, the field
or fields where the gas is produced for transportation or sale in
intrastate commerce.
(b) A person is not a gas utility because the person delivers
or sells gas:
(1) for lease use, compressor fuel, processing plant fuel,
or a similar use;
(2) under a lease or right-of-way agreement;
(3) in, or in the vicinity of, the field where the gas is
produced; or
(4) at a processing plant outlet.
(c) Subsection (b) does not exclude as a gas utility a pipeline
that:
(1) transmits or distributes to end users of gas, other

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 UTILITIES CODE

than:
(A) those described by Subsection (b); or
(B) a person who qualifies for the exemption provided
by Section 121.003; or
(2) makes city-gate deliveries for local distribution.
(d) The railroad commission may review a certification made by
a person under Subsection (a). The railroad commission shall invite
a person whose certification is being reviewed to an informal meeting
to resolve the person's status under this subsection. If the person's
status remains unresolved after the informal meeting and there is
sufficient reason to move forward, the railroad commission shall
provide notice and an opportunity for a hearing. After notice and an
opportunity for a hearing, the railroad commission may determine
whether the person is eligible for an exemption under this
subsection.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2009, 81st Leg., R.S., Ch. 406 (H.B. 1883), Sec. 1, eff.
September 1, 2009.

Sec. 121.006. VEHICLE FUEL EXCLUDED. A person is not a gas

utility to the extent that the person:
(1) sells natural gas for use as vehicle fuel;
(2) sells natural gas to a person who later sells the
natural gas for use as vehicle fuel; or
(3) owns or operates equipment or facilities to sell or
transport the natural gas for ultimate use as vehicle fuel.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 121.007. TRANSPORTATION OF GAS TO AND FROM LIQUEFIED

NATURAL GAS MARINE TERMINAL EXCLUDED. (a) A person who owns or
operates a natural gas pipeline, a liquefied natural gas pipeline, or
an underground storage facility is not a gas utility if the person
certifies to the railroad commission that the person uses the
pipeline or underground storage facility solely to deliver natural
gas or liquefied natural gas or the constituents of natural gas or
liquefied natural gas:

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 UTILITIES CODE

(1) to a liquefied natural gas marine terminal;

(2) from a liquefied natural gas marine terminal to the
owner of the gas or another person on behalf of the owner of the gas;
(3) that is acquired, liquefied, or sold by the person as
necessary for the operation or maintenance of its facility that is
excluded as a gas utility under this section; or
(4) that has been stored for export.
(b) This section does not confer the power of eminent domain to
a pipeline or underground storage facility excluded as a gas utility
under this section.
(c) This section does not create an exception to the
applicability of a pipeline safety requirement provided under this
chapter or a penalty for a violation of such a requirement.

Added by Acts 2007, 80th Leg., R.S., Ch. 709 (H.B. 2174), Sec. 2, eff.
June 15, 2007.
Amended by:
Acts 2009, 81st Leg., R.S., Ch. 406 (H.B. 1883), Sec. 2, eff.
September 1, 2009.
Acts 2009, 81st Leg., R.S., Ch. 556 (S.B. 1826), Sec. 1, eff.
September 1, 2009.
Acts 2013, 83rd Leg., R.S., Ch. 104 (S.B. 900), Sec. 5, eff.
September 1, 2013.

Sec. 121.008. CERTAIN STORAGE FACILITIES OWNED BY ELECTRIC

COOPERATIVES EXCLUDED. An electric cooperative, as that term is
defined by Section 11.003, or its subsidiary, that sells electricity
at wholesale is not a gas utility or subject to regulation as a gas
utility solely because it provides gas storage services for hire if
the gas storage facility is predominantly operated to support the
integration of renewable resources. Such a gas storage facility may
not have a working gas capacity of greater than five billion cubic
feet.

Added by Acts 2011, 82nd Leg., R.S., Ch. 4 (S.B. 312), Sec. 2, eff.
April 21, 2011.

SUBCHAPTER B. PUBLIC POLICY

Sec. 121.051. GAS UTILITY: PUBLIC INTEREST AND JURISDICTION OF

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RAILROAD COMMISSION. (a) A gas utility, including a business

described by Section 121.001(a)(3), is affected with a public
interest.
(b) A business described by Section 121.001(a)(3) is a virtual
monopoly.
(c) A business described by Section 121.001(a)(3) and the
property of the business used in this state is subject to the
jurisdiction, control, and regulation of the railroad commission as
provided by this chapter.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 121.052. PIPELINES: MONOPOLIES SUBJECT TO RAILROAD

COMMISSION. (a) The operation of a pipeline for buying, selling,
transporting, producing, or otherwise dealing in natural gas is a
business which in its nature and according to the established method
of conducting the business is a monopoly.
(b) A business described by this section may not be conducted
unless the gas pipeline used in connection with the business is
subject to the jurisdiction conferred by this chapter on the railroad
commission.
(c) The attorney general shall enforce this section by
injunction or other remedy.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER C. DUTIES OF GAS UTILITIES AND PIPELINES

Sec. 121.101. MAINTENANCE OF OFFICE AND RECORDS IN THIS STATE.
(a) A gas utility shall maintain an office in this state in a county
in which some part of the gas utility's property is located. The gas
utility shall keep in this office all books, accounts, papers,
records, vouchers, and receipts that the railroad commission
requires.
(b) A book, account, paper, record, receipt, voucher, or other
item of information required by the railroad commission to be kept in
this state may not be removed from this state except as prescribed by
the railroad commission.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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Sec. 121.102. OPERATOR'S REPORT. The railroad commission may

require a person or corporation that owns, controls, or operates a
pipeline subject to this chapter to make to the commission a sworn
report of any matter relating to the business of the person or
corporation that the commission determines to be pertinent,
including:
(1) the total quantity of gas distributed by the pipelines;
(2) the total quantity of gas held in storage;
(3) the source of supply of gas;
(4) the number of wells from which the person or
corporation draws its supply;
(5) the amount of pipeline pressure maintained; and
(6) the amount and character and description of the
equipment used.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 121.103. DUTY TO SERVE CERTAIN USERS EXTINGUISHED. (a) A

gas utility that provides gas to a customer does not have an
obligation to serve the customer or to maintain the gas supply or
physical capacity to serve the customer if the customer:
(1) is a transportation, industrial, commercial, or other
similar large-volume contract customer;
(2) is an end-use customer of the gas utility;
(3) reduces or ceases the purchase of natural gas or
natural gas service from the gas utility; and
(4) purchases natural gas or natural gas service from
another supplier or purchases an alternate form of energy.
(b) Subsection (a) does not apply to the extent that:
(1) the customer continues to purchase natural gas or
natural gas service of any class from the gas utility; or
(2) the gas utility has a written contract to provide
natural gas or natural gas service of any class to the customer.
(c) This section does not prevent the railroad commission from
requiring a gas utility to comply with an order of the railroad
commission in apportioning gas under a curtailment plan and order.
(d) Notwithstanding Subsection (a), a gas utility that has

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provided gas to a commercial customer is obligated to serve that

customer if the gas utility has a sufficient gas supply and physical
capacity to do so without reducing service to its other customers.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 2001, 77th Leg., ch. 1233, Sec. 69, eff. Sept. 1, 2001.

Sec. 121.104. DISCRIMINATION IN SERVICE AND CHARGES PROHIBITED.

(a) A pipeline gas utility may not:
(1) discriminate in favor of or against any person or place
in:
(A) apportioning the supply of natural gas; or
(B) charging for natural gas; or
(2) directly or indirectly charge, demand, collect, or
receive from anyone a greater or lesser compensation for a service
provided than the compensation charged, demanded, or received from
another for a similar and contemporaneous service.
(b) This section does not limit the right of the railroad
commission to prescribe:
(1) different rates and rules for the use of natural gas
for manufacturing and similar purposes; or
(2) rates and rules for service from or to other or
different places.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER D. REGULATION BY RAILROAD COMMISSION

Sec. 121.151. RAILROAD COMMISSION REGULATION OF GAS PIPELINES.
The railroad commission shall:
(1) establish and enforce the adequate and reasonable price
of gas and fair and reasonable rates of charges and rules for
transporting, producing, distributing, buying, selling, and
delivering gas by pipelines subject to this chapter in this state;
(2) establish fair and equitable rules for the full control
and supervision of the pipelines subject to this chapter and all
their holdings pertaining to the gas business in all their relations
to the public, as the railroad commission determines to be proper;
(3) establish a fair and equitable division of the proceeds
of the sale of gas between the companies transporting or producing

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the gas and the companies distributing or selling it;

(4) prescribe and enforce rules for the government and
control of pipelines subject to this chapter in respect to their
pipelines and producing, receiving, transporting, and distributing
facilities;
(5) regulate and apportion the supply of gas between
municipalities and between municipalities and corporations; and
(6) prescribe fair and reasonable rules requiring pipelines
subject to this chapter to augment their supply of gas, when:
(A) the supply of gas controlled by any gas pipeline is
inadequate; and
(B) the railroad commission determines that
augmentation is practicable.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 121.152. INITIATION OF REGULATORY PROCEEDING. The

railroad commission shall exercise power under Section 121.151:
(1) on:
(A) its own motion;
(B) the petition of a person or county commissioner's
precinct showing a substantial interest in the subject;
(C) the petition of the attorney general; or
(D) the petition of a district or county attorney of a
county in which any portion of a business subject to this chapter is
conducted; and
(2) after notice has been given.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 121.153. RAILROAD COMMISSION REVIEW OF GAS PIPELINE ORDERS

AND AGREEMENTS. The railroad commission, after notice to a person or
corporation owning, controlling, or operating a pipeline subject to
this chapter and after a hearing, may review, revise, and regulate an
order or agreement that is made by the person or corporation and
establishes a price, rate, rule, regulation, or condition of service.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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Sec. 121.154. REFUND OF EXCESS CHARGES. (a) On a complaint

against a person or corporation owning or operating a pipeline
business subject to this chapter filed by any person authorized by
Section 121.152 to file a petition and complaint and sustained in
whole or in part by the railroad commission, each customer of the
pipeline is entitled to reparation for or reimbursement of a rate or
charge made or adopted by the pipeline for a purpose relating to the
operation of that business, including a rate or charge for gas,
service, or meter rental, or in the event of an inadequate supply of
gas or inadequate service in any respect.
(b) The amount recoverable under Subsection (a) is the amount
paid after the filing of the complaint in excess of the proper rate
or charge of the pipeline as finally determined by the railroad
commission.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 121.155. RATE REDUCTION OR DETERMINATION BY MUNICIPALITY

AND APPEAL. A gas utility the rates of which have been reduced by a
municipality may appeal the municipal order, decision, regulation, or
ordinance to the railroad commission. The appeal is initiated by
filing with the railroad commission in the manner and on the
conditions that the railroad commission may direct a petition for
review and a bond. The appeal is de novo. The railroad commission
shall set a hearing and may make any order or decision in relation to
the matter appealed that the commission considers just and
reasonable. To change a rate, rental, or charge, a gas utility that
is a local distributing company or concern and the rates of which
have been established by a municipality must submit an application to
the municipality in which the utility is located. The municipality
shall make a determination on an application not later than the 60th
day after the date the application is filed. If the municipality
rejects the application or fails or refuses to act on the application
on or before the deadline prescribed by this section, the gas utility
may appeal to the railroad commission as provided by this section.
The railroad commission shall make a determination on the appeal not
later than the 60th day after the date the appeal is filed unless the
gas utility agrees in writing to a longer period. The rates
established by the municipality remain in effect until changed by the

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railroad commission.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 121.157. RAILROAD COMMISSION EMPLOYEES. (a) The railroad

commission may employ or appoint persons as necessary to:
(1) inspect and audit records or receipts, disbursements,
vouchers, prices, payrolls, time cards, and books;
(2) inspect the property and records of a gas utility
subject to this chapter; and
(3) perform other services as directed by, or under the
authority of, the railroad commission.
(b) The railroad commission shall set the amount of
compensation for persons employed by the railroad commission.
(c) The chief supervisor of the oil and gas division of the
railroad commission shall assist the railroad commission in the
performance of the railroad commission's duties under this chapter,
as directed by, and under the rules of, the railroad commission.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 121.158. PAYMENT FROM THE GENERAL REVENUE FUND. All

expenses, including witness fees and mileage, employee wages and
fees, and the salary and expenses of the chief supervisor of the oil
and gas division of the railroad commission incurred by or under
authority of the railroad commission or a railroad commissioner in
administering and enforcing, or exercising a power under, this
chapter shall be paid from the general revenue fund.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER E. PIPELINE SAFETY

Sec. 121.201. SAFETY RULES; RAILROAD COMMISSION POWER UNDER
DELEGATED FEDERAL AUTHORITY. (a) The railroad commission may:
(1) by rule prescribe or adopt safety standards for the
transportation of gas and for gas pipeline facilities, including
safety standards related to the prevention of damage to an interstate
or intrastate gas pipeline facility resulting from the movement of

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earth by a person in the vicinity of the facility, other than

movement by tillage that does not exceed a depth of 16 inches;
(2) by rule require an operator that does not file operator
organization information under Section 91.142, Natural Resources
Code, to provide the information to the commission in the form of an
application;
(3) by rule require record maintenance and reports;
(4) inspect records and facilities to determine compliance
with safety standards prescribed or adopted under Subdivision (1);
(5) make certifications and reports from time to time;
(6) seek designation by the United States secretary of
transportation as an agent to conduct safety inspections of
interstate gas pipeline facilities located in this state;
(7) by rule take any other requisite action in accordance
with 49 U.S.C. Section 60101 et seq. and its subsequent amendments or
a succeeding law; and
(8) by rule establish safety standards and practices for
gathering facilities and transportation activities in Class 1
locations, as defined by 49 C.F.R. Section 192.5:
(A) based only on the risks the facilities and
activities present to the public safety, to the extent consistent
with federal law; or
(B) as necessary to maintain the maximum degree of
federal delegation permissible under 49 U.S.C. Section 60101 et seq.,
or a succeeding law, if the federal government adopts safety
standards and practices for gathering facilities and transportation
activities in Class 1 locations, as defined by 49 C.F.R. Section
192.5.
(b) The power granted by Subsection (a):
(1) does not apply to the transportation of gas or to gas
facilities subject to the exclusive control of the United States but
applies to the transportation of gas and gas pipeline facilities in
this state to the maximum degree permissible under 49 U.S.C. Section
60101 et seq. and its subsequent amendments or a succeeding law; and
(2) is granted to provide exclusive state control over
safety standards and practices applicable to the transportation of
gas and gas pipeline facilities within the borders of this state to
the maximum degree permissible under that law.
(c) A term that is used in this section and defined by 49
U.S.C. Section 60101 et seq. and its subsequent amendments or a

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succeeding law has the meaning assigned by that law.

(d) In this subsection, "telecommunications service" and
"information service" have the meanings assigned by 47 U.S.C. Section
153. Notwithstanding Subsection (a), this title does not grant the
railroad commission jurisdiction or right-of-way management authority
over a provider of telecommunications service or information service.
A provider of telecommunications service or information service shall
comply with all applicable safety standards, including those provided
by Subchapter H, Chapter 756, Health and Safety Code.
(e) The power granted by Subsection (a) does not apply to:
(1) surface mining operations; or
(2) other entities or occupations if the railroad
commission determines in its rulemaking process that exempting those
entities or occupations from rules adopted under that subsection:
(A) is in the public interest; or
(B) is not likely to cause harm to the safety and
welfare of the public.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 62, Sec. 18.12(a), eff. Sept. 1, 1999;
Acts 1999, 76th Leg., ch. 1272, Sec. 1, eff. June 18, 1999.
Amended by:
Acts 2005, 79th Leg., Ch. 267 (H.B. 2161), Sec. 13, eff.
September 1, 2005.
Acts 2011, 82nd Leg., R.S., Ch. 91 (S.B. 1303), Sec. 25.002, eff.
September 1, 2011.
Acts 2013, 83rd Leg., R.S., Ch. 1045 (H.B. 2982), Sec. 3, eff.
September 1, 2013.
Acts 2013, 83rd Leg., R.S., Ch. 1045 (H.B. 2982), Sec. 4, eff.
September 1, 2013.
Acts 2013, 83rd Leg., R.S., Ch. 1177 (S.B. 901), Sec. 11, eff.
September 1, 2013.
Acts 2017, 85th Leg., R.S., Ch. 57 (H.B. 1818), Sec. 9, eff.
September 1, 2017.

Sec. 121.2015. REQUIRED SAFETY RULES. (a) The railroad

commission shall adopt rules regarding:
(1) public education and awareness relating to gas pipeline
facilities;

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(2) community liaison for responding to an emergency

relating to a gas pipeline facility; and
(3) measures a gas pipeline facility operator must
implement to prepare the gas pipeline facility to maintain service
quality and reliability during extreme weather conditions if the gas
pipeline facility:
(A) directly serves a natural gas electric generation
facility operating solely to provide power to the electric grid for
the ERCOT power region or for the ERCOT power region and an adjacent
power region; and
(B) is included on the electricity supply chain map
created under Section 38.203.
(a-1) In adopting rules under Subsection (a)(3), the railroad
commission shall take into consideration weather predictions produced
by the office of the state climatologist.
(b) The railroad commission shall require operators or their
designated representatives to communicate and conduct liaison
activities with fire, police, and other appropriate public emergency
response officials. The liaison activities must be conducted by
meetings in person except as provided by this section. An operator
or the operator's representative may conduct required community
liaison activities as provided by Subsection (c) only if the operator
or the operator's representative has made an effort to conduct a
community liaison meeting in person with the officials by one of the
following methods:
(1) mailing a written request for a meeting in person to
the appropriate officials by certified mail, return receipt
requested;
(2) sending a request for a meeting in person to the
appropriate officials by facsimile transmission; or
(3) making one or more telephone calls or e-mail message
transmissions to the appropriate officials to request a meeting in
person.
(c) If the operator or operator's representative cannot arrange
a meeting in person after complying with Subsection (b), the operator
or the operator's representative shall conduct community liaison
activities by one of the following methods:
(1) holding a telephone conference with the appropriate
officials; or
(2) delivering the community liaison information required

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to be conveyed by certified mail, return receipt requested.

(c-1) The railroad commission shall:
(1) inspect gas pipeline facilities described by Subsection
(a)(3) for compliance with rules adopted under Subsection (a)(3);
(2) provide the owner of a facility described by Subsection
(a)(3) with a reasonable period of time in which to remedy any
violation the railroad commission discovers in an inspection; and
(3) report to the attorney general any violation that is
not remedied in a reasonable period of time.
(c-2) The railroad commission shall prioritize inspections
conducted under Subsection (c-1)(1) based on risk level, as
determined by the railroad commission.
(d) The railroad commission by rule shall require a gas
pipeline facility operator described by Subsection (a)(3) that
experiences repeated or major weather-related forced interruptions of
service to:
(1) contract with a person who is not an employee of the
operator to assess the operator's weatherization plans, procedures,
and operations; and
(2) submit the assessment to the commission.
(e) The railroad commission may require an operator of a gas
pipeline facility described by Subsection (a)(3) to implement
appropriate recommendations included in an assessment submitted to
the commission under Subsection (d).
(f) The railroad commission shall assess an administrative
penalty against a person who violates a rule adopted under Subsection
(a)(3) if the violation is not remedied in a reasonable period of
time in the manner provided by this subchapter.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 18.12(b), eff. Sept. 1,
1999. Amended by Acts 2001, 77th Leg., ch. 1233, Sec. 70, eff. Sept.
1, 2001.
Amended by:
Acts 2009, 81st Leg., R.S., Ch. 1197 (H.B. 4300), Sec. 1, eff.
September 1, 2009.
Acts 2021, 87th Leg., R.S., Ch. 426 (S.B. 3), Sec. 21, eff. June
8, 2021.

Sec. 121.202. MUNICIPAL AND COUNTY AUTHORITY. (a) A

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municipality or a county may not adopt or enforce an ordinance that

establishes a safety standard or practice applicable to a facility
that is regulated under this subchapter, another state law, or a
federal law.
(b) Except as provided by Subsection (a) and by Section
121.2025, this subchapter does not reduce, limit, or impair:
(1) a power vested by law in:
(A) a county in relation to a county road; or
(B) a municipality; or
(2) the ability of a municipality to:
(A) adopt an ordinance that establishes conditions for
mapping, inventorying, locating, or relocating pipelines over, under,
along, or across a public street or alley or private residential area
in the boundaries of the municipality; or
(B) establish conditions for mapping or taking an
inventory in an area in a municipality's extraterritorial
jurisdiction.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2005, 79th Leg., Ch. 530 (H.B. 951), Sec. 5, eff. June 17,
2005.
Acts 2005, 79th Leg., Ch. 720 (S.B. 480), Sec. 3, eff. September
1, 2005.

Sec. 121.2025. AUTHORITY OF MUNICIPALITY TO ASSESS CHARGES.

(a) Except as otherwise provided by this section or Section 182.025,
Tax Code, a municipality may not assess a charge for the placement,
construction, maintenance, repair, replacement, operation, use,
relocation, or removal of a gas pipeline facility on, along, under,
or across a public road, highway, street, alley, stream, canal, or
other public way.
(b) A municipality may:
(1) assess a reasonable annual charge for the placement,
construction, maintenance, repair, replacement, operation, use,
relocation, or removal by an owner or operator of a gas pipeline
facility on, along, or across the public roads, highways, streets,
alleys, streams, canals, or other public ways located within the
municipality and maintained by the municipality; and

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(2) recover the reasonable cost of repairing damage to a

public road, highway, street, alley, stream, canal, or other public
way located within the municipality and maintained by the
municipality that is caused by the placement, construction,
maintenance, repair, replacement, operation, use, relocation, or
removal of a gas pipeline facility if the owner or operator of the
facility does not repair the damage in accordance with generally
applicable paving standards or other applicable standards in the
municipality.
(c) A charge authorized by Subsection (b)(1) may not exceed the
cost to the municipality of administering, supervising, inspecting,
and otherwise regulating the location of the gas pipeline facility,
including maintaining records and maps of the location of the
pipeline facility.
(d) The owner or operator of a gas pipeline facility may appeal
the assessment of a charge under Subsection (b)(1) to the railroad
commission. The railroad commission shall hear the appeal de novo.
Unless the municipality that assessed the charge establishes that the
charge is authorized by this section, the railroad commission shall
declare the charge invalid or reduce the charge to an amount
authorized by this section. The railroad commission has exclusive
jurisdiction to determine whether a charge under Subsection (b)(1) is
authorized by this section. The owner or operator of the gas
pipeline facility and the municipality shall share equally the costs
incurred by the railroad commission in connection with the appeal.
(e) A municipality must file suit to collect a charge
authorized by Subsection (b)(1) not later than the fourth anniversary
of the date the charge becomes due. The running of the limitations
period under this subsection is tolled on the filing of an appeal of
the charge under Subsection (d) and begins running again on the date
the appeal is determined.
(f) This section may not be construed to prevent a municipality
from:
(1) recovering the reasonable cost of repairing damage to a
municipal facility, other than a public way, caused by acts of the
owner or operator of a gas pipeline facility; or
(2) requiring the owner or operator of a gas pipeline
facility to relocate the pipeline facility, at the owner's or
operator's expense, to permit the construction, maintenance,
modification, or alteration of a municipal facility.

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(g) Notwithstanding Subsection (f)(2), the municipality shall

pay the cost of relocating a gas pipeline facility if the pipeline
facility is authorized by a property right that has priority over the
municipality's right to use the public way for the municipal
facility.

Added by Acts 2005, 79th Leg., Ch. 530 (H.B. 951), Sec. 6, eff. June
17, 2005.
Added by Acts 2005, 79th Leg., Ch. 720 (S.B. 480), Sec. 4, eff.
September 1, 2005.
Amended by:
Acts 2009, 81st Leg., R.S., Ch. 1311 (H.B. 2572), Sec. 1, eff.
June 19, 2009.

Sec. 121.203. ENFORCEMENT: INJUNCTION. The attorney general,

on behalf of the railroad commission, is entitled to injunctive
relief to restrain a violation of a safety standard adopted under
this subchapter, including an injunction that restrains the
transportation of gas or the operation of a pipeline facility.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 121.204. CIVIL PENALTY. Each day of each violation of a

safety standard adopted under this subchapter is subject to a civil
penalty of not more than $200,000, except that the maximum penalty
that may be assessed for any related series of violations may not
exceed $2 million. The penalty is payable to the state.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2013, 83rd Leg., R.S., Ch. 104 (S.B. 900), Sec. 6, eff.
September 1, 2013.

Sec. 121.205. SETTLEMENT BY ATTORNEY GENERAL. A civil penalty

under Section 121.204 may be compromised by the attorney general who
in determining a compromise shall consider:
(1) the appropriateness of the penalty in relation to the
size of the business of the person charged;

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(2) the gravity of the violation; and

(3) the good faith of the person charged in attempting to
achieve compliance after notification of the violation.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 121.206. ADMINISTRATIVE PENALTY FOR VIOLATION OF PIPELINE

SAFETY STANDARD OR RULE. (a) The railroad commission may assess an
administrative penalty against a person who violates Section 121.201
or a safety standard or other rule prescribed or adopted under this
subchapter.
(b) The penalty for each violation may not exceed $200,000.
Each day a violation continues may be considered a separate violation
for the purpose of penalty assessment, provided that the maximum
penalty that may be assessed for any related series of violations may
not exceed $2 million.
(b-1) Notwithstanding Subsection (b), the penalty for each
violation may not exceed $1,000,000 for a violation of a rule adopted
under Section 121.2015(a)(3). Each day a violation continues may be
considered a separate violation for the purpose of penalty
assessment.
(c) In determining the amount of the penalty, the railroad
commission shall consider the guidelines adopted under Subsection
(d).
(d) The railroad commission by rule shall adopt guidelines to
be used in determining the amount of a penalty under this subchapter.
The guidelines shall include a penalty calculation worksheet that
specifies the typical penalty for certain violations, circumstances
justifying enhancement of a penalty and the amount of the
enhancement, and circumstances justifying a reduction in a penalty
and the amount of the reduction. The guidelines shall take into
account:
(1) the person's history of previous violations of Section
121.201 or a safety standard or other rule prescribed or adopted
under this subchapter, including the number of previous violations;
(2) the seriousness of the violation and of any pollution
resulting from the violation;
(3) any hazard to the health or safety of the public;
(4) the degree of culpability;

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(5) the demonstrated good faith of the person charged; and

(6) any other factor the commission considers relevant.
(e) The guidelines must provide that a penalty in an amount
that exceeds $5,000 for a violation of a rule adopted under Section
121.2015(a)(3) may be assessed only if circumstances justify the
enhancement of the penalty.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 62, Sec. 18.13(b), eff. Sept. 1, 1999;
Acts 2001, 77th Leg., ch. 1233, Sec. 71, eff. Sept. 1, 2001.
Amended by:
Acts 2005, 79th Leg., Ch. 267 (H.B. 2161), Sec. 14, eff.
September 1, 2005.
Acts 2013, 83rd Leg., R.S., Ch. 104 (S.B. 900), Sec. 7, eff.
September 1, 2013.
Acts 2019, 86th Leg., R.S., Ch. 363 (H.B. 866), Sec. 1, eff. June
2, 2019.
Acts 2019, 86th Leg., R.S., Ch. 1048 (H.B. 864), Sec. 1, eff.
September 1, 2019.
Acts 2021, 87th Leg., R.S., Ch. 426 (S.B. 3), Sec. 22, eff. June
8, 2021.

Sec. 121.207. PIPELINE SAFETY ADMINISTRATIVE PENALTY:

ASSESSMENT PROCEDURE. (a) An administrative penalty may be assessed
only after a person charged under Section 121.206 has been given an
opportunity for a public hearing.
(b) If a public hearing is held, the railroad commission shall
make findings of fact and shall issue a written decision as to the
occurrence of the violation and the penalty amount warranted by the
violation, incorporating, if appropriate, an order requiring that the
penalty be paid.
(c) If appropriate, the railroad commission shall consolidate
the hearings with other proceedings under Section 121.206.
(d) If a person charged under Section 121.206 fails to take
advantage of the opportunity for a public hearing, an administrative
penalty may be assessed by the railroad commission after it has
determined:
(1) that a violation occurred; and
(2) the penalty amount warranted by the violation.

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(e) After assessing an administrative penalty, the railroad

commission shall issue an order requiring the penalty to be paid.
(f) Not later than the 30th day after the date an order is
issued finding that a violation described under Section 121.206
occurred, the railroad commission shall inform the person found in
violation of the amount of the penalty.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 121.208. PIPELINE SAFETY ADMINISTRATIVE PENALTY: PAYMENT

OF PENALTY. Not later than the 30th day after the date the railroad
commission's decision or order imposing an administrative penalty
becomes final as provided by Section 2001.144, Government Code, the
person charged with the violation shall:
(1) pay the penalty in full; or
(2) if the person seeks judicial review of either the
amount of the penalty or the fact of the violation, or both:
(A) pay the penalty to the railroad commission for
placement in an escrow account; or
(B) give to the railroad commission a supersedeas bond
in a form approved by the railroad commission for the amount of the
penalty that is effective until all judicial review of the order or
decision is final.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 121.209. PIPELINE SAFETY ADMINISTRATIVE PENALTY: REFUND

OF PAYMENT OR RELEASE OF BOND. If through judicial review of a
decision or order regarding an administrative penalty it is
determined that a violation did not occur or that the amount of the
penalty should be reduced or not assessed, the railroad commission
shall, not later than the 30th day after the date of that
determination:
(1) remit the appropriate amount to the person, with
accrued interest if the utility paid the penalty to the railroad
commission; or
(2) execute a release of the bond if the utility posted a
supersedeas bond.

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Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 121.210. RECOVERY BY ATTORNEY GENERAL. An administrative

penalty owed under Sections 121.206-121.208 may be recovered in a
civil action brought by the attorney general at the request of the
railroad commission.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 121.211. PIPELINE SAFETY AND REGULATORY FEES. (a) The

railroad commission by rule may adopt a fee to be assessed annually
against operators of natural gas distribution pipelines and their
pipeline facilities and natural gas master metered pipelines and
their pipeline facilities subject to this title.
(b) The railroad commission by rule shall establish the method
by which the fee will be calculated and assessed. In adopting a fee
structure, the railroad commission may consider any factors necessary
to provide for the equitable allocation among operators of the costs
of administering the railroad commission's pipeline safety and
regulatory program under this title.
(c) The total amount of fees estimated to be collected under
rules adopted by the railroad commission under this section may not
exceed the amount estimated by the railroad commission to be
necessary to recover the costs of administering the railroad
commission's pipeline safety and regulatory program under this title,
excluding costs that are fully funded by federal sources.
(d) The commission may assess each operator of a natural gas
distribution system subject to this title an annual fee not to exceed
one dollar for each service line reported by the system on the
Distribution Annual Report, Form RSPA F7100.1-1, due on March 15 of
each year. The fee is due March 15 of each year.
(e) The railroad commission may assess each operator of a
natural gas master metered system subject to this title an annual fee
not to exceed $100 for each master metered system. The fee is due
June 30 of each year.
(f) The railroad commission may assess a late payment penalty
of 10 percent of the total assessment due under Subsection (d) or (e)
that is not paid within 30 days after the annual due date established

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by the applicable subsection.

(g) Each operator of a natural gas distribution system and each
natural gas master meter operator shall recover as a surcharge to its
existing rates the amounts paid to the commission under this section.
Amounts collected under this subsection by an investor-owned natural
gas distribution system or a cooperatively owned natural gas
distribution system shall not be included in the revenue or gross
receipts of the company for the purpose of calculating municipal
franchise fees or any tax imposed under Subchapter B, Chapter 182,
Tax Code, or under Chapter 122. Those amounts are not subject to a
sales and use tax imposed by Chapter 151, Tax Code, or Subtitle C,
Title 3, Tax Code.
(h) A fee collected under this section shall be deposited to
the credit of the oil and gas regulation and cleanup fund as provided
by Section 81.067, Natural Resources Code.

Added by Acts 2003, 78th Leg., ch. 200, Sec. 12(a), eff. Sept. 1,
2003; Acts 2003, 78th Leg., ch. 520, Sec. 1, eff. Sept. 1, 2003.
Amended by:
Acts 2005, 79th Leg., Ch. 728 (H.B. 2018), Sec. 21.003, eff.
September 1, 2005.
Acts 2005, 79th Leg., Ch. 948 (H.B. 872), Sec. 2, eff. September
1, 2005.
Acts 2009, 81st Leg., R.S., Ch. 62 (S.B. 1658), Sec. 1, eff.
September 1, 2009.
Acts 2011, 82nd Leg., 1st C.S., Ch. 4 (S.B. 1), Sec. 19.25, eff.
September 28, 2011.
Acts 2011, 82nd Leg., 1st C.S., Ch. 4 (S.B. 1), Sec. 19.26, eff.
September 28, 2011.
Acts 2015, 84th Leg., R.S., Ch. 448 (H.B. 7), Sec. 43, eff.
September 1, 2015.

Sec. 121.213. INSTALLATION, REMOVAL, AND REPLACEMENT OF CERTAIN

PIPELINES. (a) In this section, "distribution gas pipeline
facility" means a pipeline facility that distributes natural gas
directly to end-use customers.
(b) A distribution gas pipeline facility operator may not
install as part of the operator's underground system a cast iron,
wrought iron, or bare steel pipeline.

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(c) The railroad commission by rule shall require the operator

of a distribution gas pipeline facility system to:
(1) develop and implement a risk-based program for the
removal or replacement of underground distribution gas pipeline
facilities; and
(2) annually remove or replace at least eight percent of
underground distribution gas pipeline facilities posing the greatest
risk in the system and identified for replacement under the program.

Added by Acts 2019, 86th Leg., R.S., Ch. 363 (H.B. 866), Sec. 2, eff.
June 2, 2019.

Sec. 121.214. PIPELINE INCIDENT REPORTING AND RECORDS. (a) In

this section:
(1) "Distribution gas pipeline facility" means a pipeline
facility that distributes natural gas directly to end use customers.
(2) "Pipeline incident" means an event involving a release
of gas from a pipeline that:
(A) under federal regulations, gives rise to a duty of
a distribution gas pipeline facility operator to report the event to
a federal agency; or
(B) results in one or more of the following
consequences:
(i) a death or a personal injury necessitating in-
patient hospitalization;
(ii) estimated property damage greater than or
equal to the greater of:
(a) $50,000, including loss to the operator,
loss to others, or both, but excluding cost of gas lost; or
(b) an amount under federal regulations that
gives rise to the duty of a distribution gas pipeline facility
operator to report the event to a federal agency; or
(iii) unintentional estimated gas loss of three
million cubic feet or more.
(3) "State record" has the meaning assigned by Section
441.180, Government Code.
(b) The railroad commission by rule shall require a
distribution gas pipeline facility operator, after a pipeline
incident involving the operator's pipelines, to:

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(1) notify the commission of the incident before the

expiration of one hour following the operator's discovery of the
incident;
(2) provide the following information to the commission
before the expiration of one hour following the operator's discovery
of the incident:
(A) the pipeline operator's name and telephone number;
(B) the location of the incident;
(C) the time of the incident; and
(D) the telephone number of the operator's on-site
person; and
(3) provide the following information to the commission
when the information is known by the operator:
(A) the fatalities and personal injuries caused by the
incident;
(B) the cost of gas lost;
(C) estimated property damage to the operator and
others;
(D) any other significant facts relevant to the
incident, including facts related to ignition, explosion, rerouting
of traffic, evacuation of a building, and media interest; and
(E) other information required under federal
regulations to be provided to the Pipeline and Hazardous Materials
Safety Administration or a successor agency after a pipeline incident
or similar incident.
(c) The railroad commission shall retain state records of the
railroad commission regarding a pipeline incident perpetually.

Added by Acts 2019, 86th Leg., R.S., Ch. 1048 (H.B. 864), Sec. 2,
eff. September 1, 2019.

SUBCHAPTER F. GAS SAFETY

Sec. 121.251. RAILROAD COMMISSION TO INVESTIGATE USE OF GAS
MALODORANTS. The railroad commission shall investigate the use of
malodorants by a person, firm, or corporation in the business of:
(1) handling, storing, selling, or distributing natural or
liquefied petroleum gases, including butane and other odorless gases,
for private or commercial uses; or
(2) supplying these products to a public building or the

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general public.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 121.252. REGULATION OF USE OF MALODORANTS. (a) The

railroad commission, by rule as necessary to carry out the purposes
of this section, may:
(1) require a person, firm, or corporation subject to
Section 121.251 to odorize the gas by using a malodorant agent that
indicates the presence of gas by a distinctive odor;
(2) regulate the method of the use of malodorants; and
(3) direct and approve the use of containers and other
equipment used in connection with malodorants.
(b) A required malodorant agent must be:
(1) nontoxic and noncorrosive; and
(2) not harmful to leather diaphragms in gas equipment.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 121.253. INTERSTATE TRANSPORTATION OF GAS EXCLUDED. This

subchapter does not apply to gas transported out of this state.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER G. ENFORCEMENT REMEDIES

Sec. 121.301. RECEIVERSHIP. (a) On application of the
railroad commission, a court having jurisdiction to appoint a
receiver may appoint a receiver to control and manage, under the
direction of the court, the property of a pipeline subject to this
chapter if the person or corporation owning, operating, or
controlling the pipeline violates this chapter or a rule of the
railroad commission.
(b) The railroad commission may apply for a receivership only
if the railroad commission determines that the public interest
requires a receivership.
(c) The grounds for the appointment of a receiver under this
section are in addition to any other ground provided by law.

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Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 121.302. CIVIL PENALTY. (a) A gas utility is subject to

a civil penalty if the gas utility:
(1) violates this chapter;
(2) fails to perform a duty imposed by this chapter; or
(3) fails to comply with an order of the railroad
commission if the order is not stayed or suspended by a court order.
(a-1) A penalty under this section is payable to the state and
shall be:
(1) not less than $100 and not more than $1,000 for each
violation or failure that is not related to pipeline safety; or
(2) not more than $200,000 for each violation or failure
that is related to pipeline safety, provided that the maximum penalty
that may be assessed for any related series of violations related to
pipeline safety may not exceed $2 million.
(b) Each violation and each day that the failure continues is
subject to a separate penalty.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2013, 83rd Leg., R.S., Ch. 104 (S.B. 900), Sec. 8, eff.
September 1, 2013.

Sec. 121.303. PENALTY RECOVERABLE BY VICTIM OF DISCRIMINATION.

(a) A penalty of not less than $100 and not more than $1,000 for
each violation is recoverable by any person against whom
discrimination prohibited by Section 121.104 is committed.
(b) A suit to collect a penalty under this section must be
brought in the name of and for the benefit of the person aggrieved.
(c) A person who recovers a penalty under this section is also
entitled to reasonable attorney's fees.
(d) The penalty under this section is in addition to a penalty
under Section 121.302.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 121.304. POLLUTION OR PUBLIC SAFETY ADMINISTRATIVE

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PENALTY. (a) The railroad commission may assess an administrative

penalty against a gas utility that violates this chapter, fails to
perform a duty imposed by this chapter, or fails to comply with an
order of the railroad commission issued under this chapter and
applicable to the gas utility if the violation:
(1) results in pollution of the air or water of this state;
or
(2) poses a threat to the public safety.
(b) The penalty for each violation or failure that is not
related to pipeline safety may not exceed $10,000 a day. The penalty
for each violation or failure that is related to pipeline safety may
not exceed $200,000 a day. Each day a violation continues may be
considered a separate violation for purposes of penalty assessment,
provided that the maximum penalty that may be assessed for any
related series of violations related to pipeline safety may not
exceed $2 million.
(c) In determining the amount of the penalty, the railroad
commission shall consider:
(1) the gas utility's history of previous violations of
this chapter;
(2) the seriousness of the violation; and
(3) any hazard to the health or safety of the public.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2013, 83rd Leg., R.S., Ch. 104 (S.B. 900), Sec. 9, eff.
September 1, 2013.

Sec. 121.305. POLLUTION OR PUBLIC SAFETY ADMINISTRATIVE

PENALTY: ASSESSMENT PROCEDURE. (a) An administrative penalty may
be assessed under Section 121.304 only after a gas utility charged
under Section 121.304 has been given an opportunity for a public
hearing.
(b) If a public hearing is held, the railroad commission shall
make findings of fact and shall issue a written decision as to the
occurrence of the violation and the penalty amount warranted by the
violation, incorporating, if appropriate, an order requiring that the
penalty be paid.
(c) If appropriate, the railroad commission shall consolidate

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the hearings with other proceedings under Section 121.304.

(d) If a gas utility charged under Section 121.304 fails to
take advantage of the opportunity for a public hearing, an
administrative penalty may be assessed by the railroad commission
after it has determined:
(1) that a violation occurred; and
(2) the penalty amount warranted by the violation.
(e) After assessing an administrative penalty, the railroad
commission shall issue an order requiring the penalty to be paid.
(f) Not later than the 30th day after the date an order is
issued finding that a violation described under Section 121.304
occurred, the railroad commission shall inform the gas utility found
in violation of the amount of the penalty.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 121.306. POLLUTION OR PUBLIC SAFETY ADMINISTRATIVE

PENALTY: PAYMENT OF PENALTY. (a) Not later than the 30th day after
the date the railroad commission's decision or order imposing an
administrative penalty becomes final as provided by Section 2001.144,
Government Code, the gas utility charged with the violation shall:
(1) pay the penalty in full; or
(2) if the gas utility seeks judicial review of either the
amount of the penalty or the fact of the violation, or both:
(A) pay the penalty to the railroad commission for
placement in an escrow account; or
(B) except as provided by Subsection (b), give to the
railroad commission a supersedeas bond, in the amount of the penalty
and in the form approved by the railroad commission, to stay the
collection of the penalty until all judicial review of the order or
decision is final.
(b) If the gas utility is appealing a second or subsequent
decision or order assessing an administrative penalty against the gas
utility, regardless of the finality of judicial review of any
previous decision or order, the railroad commission may, but is not
required to, accept a supersedeas bond.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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Sec. 121.307. POLLUTION OR PUBLIC SAFETY ADMINISTRATIVE

PENALTY: APPEALS. (a) The district courts of Travis County have
exclusive jurisdiction of the appeal of an order or decision of the
railroad commission assessing an administrative penalty under Section
121.304.
(b) Subchapter G, Chapter 2001, Government Code, and the
substantial evidence rule apply to an appeal under this section.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 121.308. POLLUTION OR PUBLIC SAFETY ADMINISTRATIVE

PENALTY: REFUND OF PAYMENT OR RELEASE OF BOND. If through judicial
review of a decision or order regarding an administrative penalty it
is determined that a violation did not occur or that the amount of
the penalty should be reduced or not assessed, the railroad
commission shall, not later than the 30th day after the date of that
determination:
(1) remit the appropriate amount to the gas utility with
accrued interest if the utility paid the penalty to the railroad
commission; or
(2) execute a release of the bond if the utility posted a
supersedeas bond.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 121.309. POLLUTION OR PUBLIC SAFETY ADMINISTRATIVE

PENALTY: RECOVERY. An administrative penalty owed under Sections
121.304-121.308 may be recovered in a civil action brought by the
attorney general at the request of the railroad commission.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 121.310. CRIMINAL PENALTY. (a) A person commits an

offense if:
(1) the person is an owner, officer, director, agent, or
employee of a person or corporation owning, operating, or controlling
a pipeline of a gas utility; and
(2) the person wilfully violates this chapter or Chapter

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122.
(b) An offense under this section that is not related to
pipeline safety is punishable by a fine of not less than $50 and not
more than $1,000. An offense under this section that is related to
pipeline safety is punishable by a fine of not more than $2 million.
In addition to the fine, the offense may be punishable by confinement
in jail for not less than 10 days nor more than six months.
(c) In the prosecution of a defendant for multiple offenses
under this section, all of the offenses related to pipeline safety
are considered to be part of the same criminal episode, and as
required by Section 3.03, Penal Code, the sentences of confinement
shall run concurrently. Additionally, the cumulative total of fines
imposed under this section for offenses related to pipeline safety
may not exceed the maximum amount imposed on conviction of a single
offense under this section.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2013, 83rd Leg., R.S., Ch. 104 (S.B. 900), Sec. 10, eff.
September 1, 2013.

SUBCHAPTER H. APPEALS
Sec. 121.401. APPEAL TO COURT. (a) A gas utility or other
party at interest may appeal to a court a decision of any rate,
classification, rule, charge, order, or act adopted by the railroad
commission by filing a petition against the railroad commission as
defendant and specifying each particular reason for objection.
(b) An action under this section is tried and determined as are
other civil causes in the court except as provided by Section
121.402.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 121.402. APPEAL: BURDEN AND STANDARD OF PROOF. In a

trial under this subchapter, the burden of proof is on the plaintiff,
who must show by clear and satisfactory evidence that the rate, rule,
order, classification, act, or charge that is the subject of the
complaint is unreasonable and unjust to the plaintiff.

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Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 121.403. APPEAL FROM TRIAL COURT. An appeal from an

action under Section 121.402:
(1) is at once returnable to the appellate court; and
(2) has precedence in the appellate court over each other
pending cause of a different character.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER I. SOUR GAS PIPELINE FACILITIES

Sec. 121.451. DEFINITIONS. In this subchapter:
(1) "Affected party" means the owner or occupant of real
property located in the radius of exposure, as computed in accordance
with a methodology approved by the railroad commission, of the
proposed route of a sour gas pipeline facility.
(2) "Construction" includes any activity conducted during
the initial construction of a pipeline, including the removal of
earth, vegetation, or obstructions along the proposed pipeline right-
of-way. The term does not include:
(A) surveying or acquiring the right-of-way; or
(B) clearing the right-of-way with the consent of the
owner.
(3) "Low-pressure gathering system" means a pipeline that
operates at a working pressure of less than 50 pounds per square
inch.
(4) "Sour gas pipeline facility" means a pipeline facility
that contains a concentration of 100 parts per million or more of
hydrogen sulfide.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 18.13(a), eff. Sept. 1,
1999.

Sec. 121.452. APPLICABILITY. This subchapter does not apply

to:
(1) an extension of an existing sour gas pipeline facility
that is in compliance with the railroad commission's rules for oil,
gas, or geothermal resource operation in a hydrogen sulfide area if:

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(A) the extension is not longer than five miles;

(B) the nominal pipe size is not larger than six inches
in diameter; and
(C) the railroad commission is given notice of the
construction of the extension not later than 24 hours before the
start of construction;
(2) a new or an extension of a low-pressure gathering
system; or
(3) an interstate gas pipeline facility, as defined by 49
U.S.C. Section 60101 and its subsequent amendments or a succeeding
law, that is used for the transportation of sour gas.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 18.13(a), eff. Sept. 1,
1999.
Amended by:
Acts 2013, 83rd Leg., R.S., Ch. 1177 (S.B. 901), Sec. 12, eff.
September 1, 2013.

Sec. 121.453. PERMIT APPLICATION. (a) A person may not begin

construction of a sour gas pipeline facility before the person
obtains from the railroad commission a permit to construct the
facility.
(b) An applicant for a permit to construct a sour gas pipeline
facility must:
(1) publish notice of the application in a form determined
by the railroad commission in a newspaper of general circulation in
each county that contains part of the proposed route of the sour gas
pipeline facility; and
(2) provide a copy of the application to the county clerk
of each county that contains part of the proposed route.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 18.13(a), eff. Sept. 1,
1999.

Sec. 121.454. RAILROAD COMMISSION APPROVAL OR DENIAL. (a) The

railroad commission by order may approve an application for a permit
to construct a sour gas pipeline facility if the railroad commission
finds that the materials to be used in and method of construction and
operation of the facility comply with the rules and safety standards

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adopted by the railroad commission.

(b) The railroad commission may issue an order under this
section without holding a hearing unless an affected party files a
written protest with the railroad commission not later than the 30th
day after the date notice is published under Section 121.453. If an
affected party files a written protest, the railroad commission
shall:
(1) hold a hearing not later than the 60th day after the
date the protest is filed; and
(2) issue an order:
(A) approving the permit application; or
(B) denying the application and stating the reasons for
the denial.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 18.13(a), eff. Sept. 1,
1999.

SUBCHAPTER J. TESTING OF NATURAL GAS PIPING SYSTEMS IN SCHOOL

FACILITIES
Sec. 121.5005. APPLICABILITY. This subchapter applies to a
facility of a public elementary or secondary school, including a
charter school, or a private elementary or secondary school, but does
not apply to a home school.

Added by Acts 2001, 77th Leg., ch. 1233, Sec. 73, eff. Sept. 1, 2001.

Sec. 121.501. DEFINITION. In this subchapter, "supplier" means

an individual or company that sells and delivers natural gas to a
school facility. If more than one individual or company sells and
delivers natural gas to a school facility, each individual or company
is a supplier for purposes of this subchapter.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 18.14(a), eff. Sept. 1,
1999. Amended by Acts 2001, 77th Leg., ch. 1233, Sec. 74, eff. Sept.
1, 2001.

Sec. 121.502. DUTY TO PRESSURE TEST. (a) A person responsible

for a school facility shall perform biennial pressure tests on the

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natural gas piping system in the school facility. The tests must be
performed before the beginning of the school year.
(b) A person responsible for more than one school facility may
perform the tests on a two-year cycle under which the person pressure
tests the natural gas piping system in approximately one-half of the
facilities each year.
(c) If the person responsible for one or more school facilities
operates the facilities on a year-round calendar, the pressure test
in each of those facilities must be conducted and reported not later
than July 1 of the year in which the pressure test is performed.
(d) A natural gas piping pressure test performed under a
municipal code satisfies the pressure testing requirements prescribed
by this section.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 18.14(a), eff. Sept. 1,
1999. Amended by Acts 2001, 77th Leg., ch. 1233, Sec. 74, eff. Sept.
1, 2001.

Sec. 121.503. REQUIREMENTS OF TEST. (a) The person

responsible for a school facility shall perform the pressure test to
determine whether the natural gas piping downstream of the school
facility's meter holds at least normal operating pressure over a
specified period determined by the railroad commission.
(b) During the pressure test, each system supply inlet and
outlet in the school facility must be closed.
(c) At the request of a person responsible for a school
facility, the railroad commission shall assist the person in
developing a procedure for conducting the test.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 18.14(a), eff. Sept. 1,
1999. Amended by Acts 2001, 77th Leg., ch. 1233, Sec. 74, eff. Sept.
1, 2001.

Sec. 121.504. NOTICE OF TEST. (a) A person responsible for a

school facility shall provide written notice to the school's supplier
specifying the date and result of each pressure test or other
inspection.
(b) The supplier shall maintain a copy of the notice until at
least the first anniversary of the date on which the supplier

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received the notice.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 18.14(a), eff. Sept. 1,
1999. Amended by Acts 2001, 77th Leg., ch. 1233, Sec. 74, eff. Sept.
1, 2001.

Sec. 121.505. TERMINATION OF SERVICE. (a) A supplier shall

terminate service to a school facility if:
(1) the supplier receives official notification from the
firm or individual conducting the test of a hazardous natural gas
leakage in the facility piping system; or
(2) a test or other inspection at the facility is not
performed as required by this subchapter.
(b) A supplier is not liable for any damages that result from a
failure to terminate service as required by Subsection (a)(2) for a
facility other than a school district facility.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 18.14(a), eff. Sept. 1,
1999. Amended by Acts 2001, 77th Leg., ch. 1233, Sec. 74, eff. Sept.
1, 2001.

Sec. 121.506. REPORT OF LEAKAGE. An identified natural gas

leakage in a school district facility must be reported to the board
of trustees of the district in which the facility is located. An
identified natural gas leakage in another school facility must be
reported to the person responsible for the school facility.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 18.14(a), eff. Sept. 1,
1999. Amended by Acts 2001, 77th Leg., ch. 1233, Sec. 74, eff. Sept.
1, 2001.

Sec. 121.507. ENFORCEMENT. The railroad commission shall

enforce this subchapter.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 18.14(a), eff. Sept. 1,
1999.

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CHAPTER 122. GAS UTILITY PIPELINE TAX

SUBCHAPTER A. DEFINITIONS
Sec. 122.001. DEFINITIONS. In this chapter:
(1) "Gas utility" has the meaning assigned by Section
121.001(a)(2) and includes a person without regard to whether the
person acquired a part of the right-of-way for the pipeline by
eminent domain.
(2) "Gross income" includes all gross receipts the gas
utility received from activities described by Section 121.001(a)(2)
that are performed in this state, other than an activity excluded by
Chapter 121 from the activities that make a person a gas utility for
purposes of that chapter, and excludes the amount of the deduction
allowed by Section 122.052.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER B. TAX IMPOSED

Sec. 122.051. TAX IMPOSED; RATE. (a) A tax is imposed on
each gas utility.
(b) The gas utility tax is imposed at the rate of one-half of
one percent of the gross income of the gas utility.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 122.052. DEDUCTION OF CERTAIN COSTS. A gas utility is

entitled to deduct from the utility's gross receipts the amount of
the cost paid to another person by the utility for purchasing,
treating, or storing natural gas or for gathering or transporting
natural gas to the utility's facilities.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER C. PAYMENTS, REPORTS, AND RECORDS

Sec. 122.101. TAX PAYMENT. (a) A gas utility on whom a tax is
imposed by this chapter during a calendar quarter shall pay the tax
to the railroad commission.
(b) A gas utility shall make the tax payment payable to the
comptroller.

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Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 122.102. REPORT. (a) A gas utility on whom a tax is

imposed by this chapter during a calendar quarter shall include with
the tax payment a report to the railroad commission that includes a
statement of:
(1) all activity subject to the tax during the period
covered by the report; and
(2) the gross income from that activity.
(b) The president, secretary, or general manager of a gas
utility that is a corporation or an owner of a gas utility that is
not a corporation must verify the truth and accuracy of the report.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 122.103. PAYMENT AND REPORT DEADLINE. A tax payment and

report under this chapter for a calendar quarter are due on or before
the 20th day of the second month of the succeeding quarter.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 122.104. RECORDS. A person on whom a tax is imposed by

this chapter shall maintain until the fourth anniversary of the date
the tax report and payment for a calendar quarter are due records
sufficient to:
(1) document the person's tax report; and
(2) establish the amount of the tax imposed.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER D. ADMINISTRATION
Sec. 122.151. ADMINISTRATION BY RAILROAD COMMISSION.
The
railroad commission:
(1) shall administer and collect the taxes imposed by this
chapter; and
(2) may adopt rules necessary to administer this chapter
and to collect and enforce the taxes.

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Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 122.152. EXAMINATION OF RECORDS AND PERSON DOING BUSINESS

IN THIS STATE. To enforce this chapter, the railroad commission may
examine:
(1) a book, record, or paper of a person permitted to do
business in this state, including an agent of the person, at an
office of the person or agent in the United States; and
(2) an officer or employee of a person described by
Subdivision (1) under oath.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER E. PENALTIES AND INTEREST

Sec. 122.201. PENALTY FOR FAILURE TO REPORT TAX. A person who
is required to report a tax imposed by this chapter and fails to
report as required by Sections 122.102 and 122.103 shall pay:
(1) a penalty of five percent of the amount of the tax due
with the report; and
(2) if the report is not made before the 31st day after the
date the report is initially required to be made, an additional
penalty of five percent of the amount of the tax due with the report.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 122.202. PENALTY FOR FAILURE TO PAY TAX. A person who is

required to pay a tax imposed by this chapter and fails to pay the
tax as required by Sections 122.101 and 122.103 shall pay:
(1) a penalty of five percent of the amount of the tax due
and unpaid; and
(2) if the tax is not paid before the 31st day after the
date the tax payment is initially required to be made, an additional
penalty of five percent of the amount of the tax due and unpaid.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 122.203. PENALTY FOR FAILURE TO REPORT AND PAY TAX. If a

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person fails to make the report and to pay the tax for a reporting
period, only the penalty and additional penalty under Section
122.201, as applicable, for failure to make the report is imposed.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 122.204. MINIMUM PENALTY. If the amount of a penalty or

additional penalty computed as provided by this subchapter is less
than $5, the amount of the penalty or additional penalty is $5.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 122.205. INTEREST. A tax imposed by this chapter that

becomes delinquent draws interest at the rate of 12 percent a year
beginning on the 60th day after the date the tax becomes delinquent
and continues to draw interest until the date the tax is paid.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

CHAPTER 123. USE OF NATURAL GAS FOR AGRICULTURAL PURPOSES

SUBCHAPTER A. NATURAL GAS SUPPLY FOR AGRICULTURAL PURPOSES
Sec. 123.001. NATURAL GAS SUPPLY FOR AGRICULTURAL PURPOSES. A
person, firm, corporation, partnership, association, or cooperative
who sells natural gas for irrigation may not reduce the supply of
natural gas for an agricultural purpose, including irrigation pumping
or crop drying, if that person or entity:
(1) sells and distributes natural gas in a municipality;
or
(2) delivers gas to the boundary of a municipality for
resale in the municipality.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 123.002. EXCEPTION. This subchapter does not apply to the

extent that the supply of natural gas is required to maintain natural
gas service for:
(1) use by residential users or hospitals; or

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(2) an analogous use that is vital to public health and

safety.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER B. AGRICULTURE GAS USERS ACT

Sec. 123.021. SHORT TITLE. This subchapter may be cited as the
Agriculture Gas Users Act.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 123.022. DEFINITIONS. In this subchapter:

(1) "Agriculture energy user" means a person who purchases
or uses natural gas for fuel for an irrigation well.
(2) "Corporation" means a domestic or foreign corporation
or association, and each lessee, assignee, trustee, receiver, or
other successor in interest of the corporation or association, that
has any of the powers or privileges of a corporation not possessed by
an individual or partnership.
(3) "Person" includes an individual, a partnership of two
or more persons having a joint or common interest, a mutual or
cooperative association, and a corporation.
(4) "Supplier" means a person who furnishes natural gas to
an agriculture energy user.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 123.023. CONTRACT FOR NATURAL GAS. (a) A supplier and an

agriculture energy user may by contract establish a price and other
terms of service for the furnishing of natural gas.
(b) A contract under this section must be negotiated in good
faith and the result of arm's-length bargaining between the parties.
(c) Each party shall provide information and maintain records
as reasonably necessary for the contract.
(d) A price charged to an agriculture energy user under the
contract may not exceed the price charged to a majority of the
supplier's commercial users or other similar large-volume users.

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Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 123.024. EXCEPTION. This subchapter does not apply to a

transaction between an agriculture energy user and a supplier who
does not deliver gas to a municipality unless:
(1) the parties agree the subchapter applies to the
transaction; and
(2) the contract states the subchapter applies to the
transaction.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

CHAPTER 124. SUBMETERING TO MOBILE HOME PARKS AND APARTMENT HOUSES

Sec. 124.001. DEFINITIONS. In this chapter:
(1) "Apartment house" means one or more buildings
containing more than five dwelling units each of which is rented
primarily for nontransient use with rent paid at intervals of one
week or longer. The term includes a rented or owner-occupied
residential condominium.
(2) "Dwelling unit" means:
(A) one or more rooms that are suitable for occupancy
as a residence and that contain kitchen and bathroom facilities; or
(B) a mobile home in a mobile home park.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 124.002. SUBMETERING. (a) The railroad commission shall

adopt rules under which an owner, operator, or manager of a mobile
home park or apartment house may purchase natural gas through a
master meter for delivery to a dwelling unit in the mobile home park
or apartment house using individual submeters to allocate fairly the
cost of the gas consumption of each dwelling unit.
(b) In addition to other appropriate safeguards for a resident
of a mobile home park or apartment house, the rules must provide that
the owner, operator, or manager of the mobile home park or apartment
house:
(1) may not deliver natural gas for sale or resale for
profit; and

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(2) shall maintain adequate records relating to that

submetering and make those records available for inspection by the
resident during reasonable business hours.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBTITLE C. PROPANE GAS DISTRIBUTION SYSTEMS

CHAPTER 141. STANDARDS FOR DISTRIBUTION SYSTEM RETAILERS
Sec. 141.001. DEFINITIONS. In this chapter:
(1) "Allowable markup" means the two-calendar-year rolling
average of the differences between the monthly E.I.A. retail prices
per gallon reported during the two calendar years immediately
preceding the calendar year in which a billing month occurs and the
corresponding spot prices per gallon reported for the same month an
E.I.A. retail price was reported during those two calendar years. As
an example of the calculated allowable markup, for 2013, the
allowable markup is $1.48 per gallon.
(2) "Allowable spot price" means the average of the spot
prices for the two months preceding the billing month. As an example
of the calculated allowable spot price, for the billing month of
January 2013, the allowable spot price was $0.844 per gallon. The
commission shall identify the allowable spot price each month and
publish that price on the commission's website.
(3) "Commission" means the Railroad Commission of Texas or
its successor agency.
(4) "Customer" means a retail customer of propane gas
purchased from and delivered by a distribution system retailer
through a propane gas system.
(5) "Distribution system retailer":
(A) means a retail propane dealer that:
(i) owns or operates for compensation in this state
a propane gas system; and
(ii) has a Category E or K license issued by the
applicable license and permit section of the commission; and
(B) does not include a person that furnishes propane
gas only to the person, to the person's employees, or to the person's
tenants as an incident of employment or tenancy, if the service is
not resold to customers.
(6) "E.I.A. retail price" means the monthly U.S. Propane

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Residential Price as reported by the United States Energy Information

Administration or its successor agency in dollars per gallon. As an
example of the calculated E.I.A. retail price, for January 2013, the
E.I.A. retail price was $2.449 per gallon.
(7) "Propane gas" means a normally gaseous hydrocarbon
defined as propane by the United States Energy Information
Administration or its successor agency.
(8) "Propane gas system" means one or more propane storage
containers, equipment, and facilities connected to a contiguous
piping system through which propane gas is supplied by a distribution
system retailer to at least 10 customers.
(9) "Rate" means the price per cubic foot of gas passing
through the meter levied, charged, or collected by a distribution
system retailer from a customer for propane gas provided through a
propane gas system to the customer exclusive of any fees, taxes, or
other charges. A conversion factor of 36.4 cubic feet of propane gas
per gallon shall be used for purposes of determining a rate.
(10) "Spot price" means the Mont Belvieu, TX monthly
Propane Spot Price FOB per gallon as reported by the United States
Energy Information Administration or its successor agency in dollars
per gallon. In January 2013, the spot price was $0.838 per gallon.

Added by Acts 2013, 83rd Leg., R.S., Ch. 1296 (H.B. 2532), Sec. 1,
eff. September 1, 2013.

Sec. 141.002. APPLICABILITY. This chapter applies only to the

retail sale of propane gas made by a distribution system retailer
through a propane gas system. This chapter does not apply to any
other retail or wholesale sale of propane gas.

Added by Acts 2013, 83rd Leg., R.S., Ch. 1296 (H.B. 2532), Sec. 1,
eff. September 1, 2013.

Sec. 141.003. RATE AND FEE CEILINGS. (a) In each billing

month, a distribution system retailer shall charge a customer a just
and reasonable rate for propane gas provided through a propane gas
system to the customer. For the purposes of this section, a just and
reasonable rate charged monthly for propane gas is a rate for propane
gas provided through a propane gas system to the customer if it is

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less than or equal to the allowable spot price plus the allowable
markup. For a customer's bill that contains days in more than one
month, the month with the most days covered by the bill shall be
considered the billing month. The price per gallon shall be
converted to the cubic foot rate by dividing the price per gallon by
36.4.
(b) In addition to the rate authorized by Subsection (a), a
distribution system retailer may charge customers special fees for
services, including a connection fee, a disconnection fee, a monthly
account fee to maintain an active account, a late payment fee, a
disconnect or termination fee, a reconnection fee, an accelerated
reconnection fee, a dishonored or canceled payment fee, a service
initiation fee, and a tampering fee or an unauthorized gas
consumption or diversion fee, if the fees are reasonable and
customary. For purposes of this section, the fees described above
that were charged or adopted by a distribution system retailer as of
January 1, 2013, as adjusted pursuant to Subsection (c), are deemed
reasonable and customary for that distribution system retailer and
its successors regarding any systems owned or operated currently or
in the future.
(c) The distribution system retailer may adjust the fees
described by Subsection (b) up or down based on the 12-month changes
in the Consumer Price Index for All Urban Consumers, U.S. City
Average, All Items, CPI-U, Not Seasonally Adjusted, published by the
Bureau of Labor Statistics of the United States Department of Labor
or a similar index if that index is unavailable. For calculation
purposes, the beginning base month is December 2012.
(d) Nothing in this section limits a distribution system
retailer's ability to pass through to a customer as a separate charge
on a pro rata actual-cost basis:
(1) a tax, other than a tax assessed on the basis of
income, gross income, property, or margins;
(2) an assessment, surcharge, levy, fee, or other charge
imposed by a governmental entity, any one of which begins or is
increased on or after January 1, 2013, either:
(A) directly on a propane gas system or any portion; or
(B) on a distribution system retailer by virtue of its
ownership or operation of a propane gas system; or
(3) a sales tax or franchise fee.
(e) A fee passed through to a customer under Subsection (d)

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shall be:
(1) passed through without any additional markup; and
(2) identified as a separate item on a customer's bill.
(f) Notwithstanding any other provision in this section, this
subtitle does not apply to a new gas line construction charge, a gas
line repair charge, or an appliance repair charge.
(g) In the event either or both the E.I.A. retail price or the
Mont Belvieu, TX monthly Propane Spot Price FOB per gallon cease to
be available, the commission shall designate a reasonably similar
available substitute index or indices as necessary for purposes of
calculation of the rate deemed just and reasonable for purposes of
this section. Until the commission publishes an order designating
the substitute index or indices, distribution system retailers shall
charge a rate not to exceed the most recent available allowable
markup plus the most recent available Mont Belvieu, TX monthly
Propane Spot Price FOB per gallon. If the Mont Belvieu, TX monthly
Propane Spot Price FOB per gallon is not available from the United
States Energy Information Administration, the distribution system
retailer, for the purpose of defining the spot price, may identify
and use the Mont Belvieu, TX monthly Propane Spot Price FOB per
gallon as reported by an alternative publicly available published
source.

Added by Acts 2013, 83rd Leg., R.S., Ch. 1296 (H.B. 2532), Sec. 1,
eff. September 1, 2013.

Sec. 141.0031. DAYS IN BILLING MONTH. (a) A customer's bill

may not include charges for a period of more than:
(1) 32 days for a billing month in which the majority of
days in the billing month occur in December, January, or February; or
(2) 31 days for a billing month in which the majority of
days in the billing month occur in any other month.
(b) If an extreme condition occurs or continues on or after the
29th day of a billing month described by Subsection (a)(1), the
billing month may be extended by the number of days the extreme
condition occurs. Extreme conditions include:
(1) iced, flooded, closed, or otherwise impassable roads in
the county in which the customer resides;
(2) a natural disaster, including an earthquake, a

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hurricane, a tornado, or winds of more than 60 miles per hour; and

(3) civil disruption, including war, riot, or labor
disruption or stoppage.

Added by Acts 2015, 84th Leg., R.S., Ch. 783 (H.B. 2558), Sec. 1, eff.
September 1, 2015.

Sec. 141.004. DISCONNECTION OF PROPANE GAS SERVICE. (a) A

distribution system retailer may not disconnect propane gas service
to a residential customer on a weekend day or holiday officially
observed by the State of Texas unless personnel of the distribution
system retailer are available on that day to receive payments and
reconnect service.
(b) A distribution system retailer may not disconnect propane
gas service to a residential customer during an extreme weather
emergency, as defined by Section 104.258. The distribution system
retailer shall defer collection of the full payment of bills that are
due during an extreme weather emergency, as defined by Section
104.258, until after the emergency is over.

Added by Acts 2013, 83rd Leg., R.S., Ch. 1296 (H.B. 2532), Sec. 1,
eff. September 1, 2013.

Sec. 141.005. CONTINUITY OF SERVICE. (a) A distribution

system retailer shall make all reasonable efforts to prevent
interruptions of service. When an interruption occurs, the
distribution system retailer shall reestablish service within the
shortest possible time consistent with prudent operating principles
so that the smallest number of customers are affected.
(b) Excluding service interruptions under Section 141.006, a
distribution system retailer shall keep complete records of all
emergency and scheduled service interruptions lasting more than six
hours and affecting more than two customers. The records must
describe the cause, date, length, and location of each interruption,
the approximate number of customers affected by the interruption,
and, in the case of an emergency interruption, the remedy and steps
taken to prevent a recurrence, if applicable. The distribution system
retailer shall submit copies of the service interruption records to
the commission quarterly.

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 UTILITIES CODE

(c) The distribution system retailer shall notify the

commission in writing not later than 48 hours after an interruption
in service that affects the entire propane gas system, lasts more
than four hours, represents an existing or probable hazard to persons
or property, and requires immediate repair or continuous action until
the conditions are no longer hazardous. The notice shall include the
distribution system report of a service interruption. A written
report of a service interruption in another form, including a part of
a safety report, is sufficient to comply with this subsection.
(d) The commission shall establish and maintain a toll-free
telephone number to enable a customer to notify the commission of a
service interruption that does not involve a refusal to serve under
Section 141.006. The commission shall immediately investigate the
notification. A distribution system retailer shall notify the
customer of the commission phone number on each billing statement.
(e) To restore and maintain service, the commission may assume
temporary operational control of a propane gas system that
experiences a service interruption that affects the entire propane
gas system and that:
(1) continues to affect the entire propane gas system after
the distribution system retailer has had direct access to and control
of the system for more than 48 hours after the service interruption
began;
(2) occurs more than three times in one month; or
(3) is the result of the distribution system retailer's
failure or refusal to replenish the primary propane tank for a reason
other than a general local market disruption, a restriction on
wholesale propane supplies, mechanical failure, criminal activity, or
an act of God.
(f) The commission may draw down all or part of the financial
surety posted under Section 141.009, as required, to restore and
maintain service under Subsection (e).
(g) At the request of the commission, the attorney general
shall bring suit for the appointment of a receiver to collect the
assets and carry on the business of a distribution system retailer
that:
(1) has abandoned operation of its facilities;
(2) informs the commission that the owner is abandoning the
system; or
(3) experiences a service interruption as described under

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Subsection (e).
(h) The court shall appoint a receiver if an appointment is
necessary to guarantee:
(1) the collection of assessments, fees, penalties, or
interest; or
(2) continuous and adequate service to the customers of the
utility.
(i) The receiver shall execute a bond to assure the proper
performance of the receiver's duties in an amount to be set by the
court.
(j) After appointment and execution of bond, the receiver shall
take possession of the assets of the utility specified by the court.
Until discharged by the court, the receiver shall perform the duties
that the court directs to preserve the assets and carry on the
business of the utility and shall strictly observe the final order
involved.
(k) On a showing of good cause by the distribution system
retailer, the court may dissolve the receivership and order the
assets and control of the business returned to the distribution
system retailer.
(l) Notwithstanding Section 64.021, Civil Practice and Remedies
Code, a receiver appointed under this section may seek commission
approval to acquire the distribution system retailer's facilities.
(m) Subject to the approval of the court and after giving
notice to all interested parties, the receiver may sell or otherwise
dispose of all or part of the real or personal property of a propane
gas system against which a proceeding has been brought under this
subchapter to pay the costs incurred in the operation of the
receivership. The costs include:
(1) payment of fees to the receiver for the receiver's
services;
(2) payment of fees to attorneys, accountants, engineers,
or any other persons or entities that provide goods or services
necessary to the operation of the receivership; and
(3) payment of costs incurred ensuring that any property
owned or controlled by a distribution system retailer is not used in
violation of a final order of the court.

Added by Acts 2013, 83rd Leg., R.S., Ch. 1296 (H.B. 2532), Sec. 1,
eff. September 1, 2013.

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Sec. 141.006. GROUNDS FOR REFUSAL TO SERVE. (a) A distribution

system retailer may refuse service to an applicant for new service or
to an existing customer for continued service or reconnection if:
(1) an applicant or customer fails to pay fees, advances,
contributions, or deposits required for service under the
distribution system retailer's policies;
(2) an applicant or customer fails to furnish a service or
meter location specified for service by the distribution system
retailer;
(3) the existence or repeated creation of an unsafe
condition, such as impaired meter access or a leak in the applicant's
piping system, may potentially create bodily harm or endanger life or
property in the distribution system retailer's opinion;
(4) an applicant, customer, or service location owner is
delinquent in payment for services provided by a distribution system
retailer service location owner; or
(5) a current resident or occupant of the premises to
receive service is delinquent in payment for services provided by a
distribution system retailer.
(b) The right to refuse service ends when the cause for the
refusal to serve is corrected.

Added by Acts 2013, 83rd Leg., R.S., Ch. 1296 (H.B. 2532), Sec. 1,
eff. September 1, 2013.

Sec. 141.007. REASONABLE TIME TO BEGIN SERVICE. A distribution

system retailer may delay providing service following an application
or execution of an agreement for service for a reasonable amount of
time considering required approvals, inspections, or permits, the
extent of the facilities to be built, and the distribution system
retailer's workload at the time.

Added by Acts 2013, 83rd Leg., R.S., Ch. 1296 (H.B. 2532), Sec. 1,
eff. September 1, 2013.

Sec. 141.008. CUSTOMER COMPLAINTS. (a) A distribution system

retailer that receives a written complaint shall promptly and

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suitably investigate the complaint and advise the complainant of the

results of the investigation. A distribution system retailer shall
keep for at least three years after the final disposition of each
complaint a record that includes each complainant's name and address,
the date and nature of the complaint, and the adjustment or
disposition of the complaint. A distribution system retailer is not
required to keep a record of a complaint that does not require the
distribution system retailer to take specific further action. A
distribution system retailer shall notify each complainant of the
right to file a complaint with the commission if the complainant is
not satisfied by the distribution system retailer's resolution of the
matter.
(b) On receipt of a written complaint from the commission on
behalf of a customer, a distribution system retailer promptly and
suitably shall investigate and notify the commission and complainant
of the results of the investigation. An initial response must be made
not later than the third business day after the date the distribution
system retailer receives the complaint electronically delivered to a
minimum of two electronic addresses designated by the distribution
system retailer. A distribution system retailer shall send a final
and complete response to the commission and complainant not later
than the 15th day after the date the complaint was received, unless
the commission grants additional time before the expiration of the
15-day period.
(c) The commission may impose sanctions on a distribution
system retailer if, after an investigation, the commission determines
that the distribution system retailer has violated Section 141.003.
Sanctions may include:
(1) adopting an order requiring a distribution system
retailer to refund the amounts of any overcharges to the distribution
system retailer's customers;
(2) drawing down all or a portion of the financial surety
for the purpose of refunding the amounts of any overcharges to the
distribution system retailer's customers not refunded before the 61st
day after the date the commission orders a refund; or
(3) adopting an order setting rates and fees for the
distribution system retailer in accordance with Section 141.003.

Added by Acts 2013, 83rd Leg., R.S., Ch. 1296 (H.B. 2532), Sec. 1,
eff. September 1, 2013.

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Sec. 141.009. PERFORMANCE GUARANTEE. A distribution system

retailer shall post, in favor of the commission, financial surety in
the form of a letter of credit, bond, or other acceptable form of
financial surety with the commission in an amount equal to the lesser
of $3 multiplied by the number of gallons of aggregate storage
capacity in all of the propane gas systems operated by the
distribution system retailer or $50,000. The issuer of the financial
surety used to meet this requirement shall honor the financial surety
if the issuer receives from the commission notice that the financial
surety is due and payable. The commission may draw down all or a
portion of the financial surety. The distribution system retailer
shall provide the commission with verification of the adequacy of the
financial surety, and the commission may order the distribution
system retailer to adjust the amount of the financial surety
annually.

Added by Acts 2013, 83rd Leg., R.S., Ch. 1296 (H.B. 2532), Sec. 1,
eff. September 1, 2013.

Sec. 141.010. DISCLOSURE TO HOMEOWNERS. (a) A distribution

system retailer shall record in the real property records of each
county in which the distribution system retailer owns or operates a
propane gas system a notice of disclosure of the existence of the
propane gas system and the service the retailer provides. The notice
shall include:
(1) a service map reflecting the location of the
subdivisions or areas the distribution system retailer serves in the
county;
(2) a copy of this chapter or a summary of the customer's
rights under this chapter; and
(3) for development agreements entered into after September
1, 2013, a statement disclosing the existence of any financial
interest held by a homeowners' association, municipal utility
district, or developer in the propane gas system.
(b) If a person proposes to sell or convey real property
located in a propane gas system service area owned by a distribution
system retailer, the person must give to the purchaser written notice

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as prescribed by this subsection. The notice must include a copy of

the notice recorded in the real property records as required by
Subsection (a), must be executed by the seller, and must read as
follows: "The real property, described below, that you are about to
purchase may be located in a propane gas system service area, which
is authorized by law to provide propane gas service to the properties
in the area pursuant to Chapter 141, Utilities Code. If your
property is located in a propane gas system service area, there may
be special costs or charges that you will be required to pay before
you can receive propane gas service. There may be a period required
to construct lines or other facilities necessary to provide propane
gas service to your property. You are advised to determine if the
property is in a propane gas system service area and contact the
distribution system retailer to determine the cost that you will be
required to pay and the period, if any, that is required to provide
propane gas service to your property.
"The undersigned purchaser hereby acknowledges receipt of the
foregoing notice at or before the execution of a binding contract for
the purchase of the real property described in the notice or at
closing of purchase of the real property.
________________________________
Date
________________________________
Signature of Purchaser"
(c) Each county shall accept and record in its real property
records a distribution system retailer's service map presented to the
county clerk under this section if the map meets filing requirements,
does not exceed 11 inches by 17 inches in size, and is accompanied by
the appropriate fee. The recording required by this section must be
completed not later than the later of January 1, 2014, or the 90th
day after the date a distribution system retailer completes
construction of a new propane gas system in the county.

Added by Acts 2013, 83rd Leg., R.S., Ch. 1296 (H.B. 2532), Sec. 1,
eff. September 1, 2013.

TITLE 4. DELIVERY OF UTILITY SERVICES

SUBTITLE A. UTILITY CORPORATIONS AND OTHER PROVIDERS
CHAPTER 161. ELECTRIC COOPERATIVE CORPORATIONS

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SUBCHAPTER A. GENERAL PROVISIONS

Sec. 161.001. SHORT TITLE. This chapter may be cited as the
Electric Cooperative Corporation Act.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 161.002. DEFINITIONS. In this chapter:

(1) "Acquire" means and includes construct, acquire by
purchase, lease, devise, or gift, or other mode of acquisition.
(2) "Board" means the board of directors of an electric
cooperative.
(3) "Central station service" means electric service
provided by a municipally owned electric system or by an electric
corporation described by Subchapter A, Chapter 181.
(4) "Electric cooperative" means a corporation that is
organized under this chapter or that becomes subject to this chapter
as provided by this chapter.
(5) "Member" means:
(A) an incorporator of an electric cooperative; or
(B) a person admitted to membership in the electric
cooperative as provided by Section 161.065.
(6) "Obligation" includes a bond, note, debenture, interim
certificate or receipt, or other evidence of indebtedness issued by
an electric cooperative.
(7) "Rural area" means an area, including both farm and
nonfarm population of the area, that is not located in:
(A) a municipality having a population greater than
1,500; or
(B) an unincorporated city, town, village, or borough
having a population greater than 1,500.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 161.003. CONSTRUCTION OF CHAPTER. This chapter shall be

liberally construed. The enumeration of a purpose, power, method, or
thing does not exclude similar purposes, powers, methods, or things.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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 UTILITIES CODE

Sec. 161.004. CERTAIN CORPORATE NAMES PROHIBITED. A

corporation organized under the laws of this state or authorized to
do business in this state may not use the words "electric
cooperative" in the corporation's name unless the corporation is
organized under this chapter.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 161.005. CHAPTER COMPLETE AND CONTROLLING. This chapter

is complete in itself and is controlling.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER B. CREATION AND OPERATION OF ELECTRIC COOPERATIVES

Sec. 161.051. INCORPORATORS. (a) Three or more individuals
may act as incorporators of an electric cooperative by executing
articles of incorporation as provided by this chapter.
(b) An incorporator must:
(1) be at least 21 years of age; and
(2) reside in this state.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 161.052. DURATION OF CORPORATION. An electric cooperative

may be created as a perpetual corporation.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 161.053. NAME OF ELECTRIC COOPERATIVE. The name of an

electric cooperative must:
(1) include the words "Electric Cooperative";
(2) include the term "Corporation," "Incorporated," "Inc.,"
"Association," or "Company"; and
(3) be distinct from the name of any other corporation
organized under the laws of this state.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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 UTILITIES CODE

Sec. 161.054. ARTICLES OF INCORPORATION. (a) The articles of

incorporation of an electric cooperative must state:
(1) the name of the cooperative;
(2) the purpose for which the cooperative is formed;
(3) the name and address of each incorporator;
(4) the number of directors;
(5) the address of the cooperative's principal office and
the name and address of its agent on whom process may be served;
(6) the duration of the cooperative;
(7) the terms under which a person is admitted to
membership and retains membership in the cooperative, unless the
articles expressly state that the determination of membership matters
is reserved to the directors by the bylaws; and
(8) any provisions that the incorporators include for the
regulation of the business and the conduct of the affairs of the
cooperative.
(b) The articles of incorporation do not need to state any of
the corporate powers enumerated in this chapter.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 161.055. FILING AND RECORDING OF ARTICLES OF

INCORPORATION. (a) The secretary of state shall receive articles of
incorporation of an electric cooperative if the incorporators of the
cooperative:
(1) apply for filing the articles;
(2) furnish satisfactory evidence of compliance with this
chapter to the secretary of state; and
(3) pay a fee of $10.
(b) The secretary of state shall:
(1) file the articles of incorporation in the secretary's
office;
(2) record the articles at length in a book to be kept for
that purpose;
(3) retain the original articles of incorporation on file
in the secretary's office; and
(4) issue a certificate showing the recording of the

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articles of incorporation and the electric cooperative's authority to

do business under the articles.
(c) A copy of the articles of incorporation or of the record of
the articles, certified under the state seal, is evidence of the
creation of the electric cooperative.
(d) The existence of the electric cooperative dates from the
filing of the articles in the office of the secretary of state. The
certificate of the secretary of state is evidence of that filing.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 161.056. REVIVAL OF ARTICLES OF INCORPORATION. (a) If

the articles of incorporation of an electric cooperative expire by
limitation, the cooperative, with the consent of a majority of its
members, may revive the articles by filing:
(1) new articles of incorporation under this chapter; and
(2) a certified copy of the expired original articles.
(b) An electric cooperative that revives its articles of
incorporation has all the privileges, immunities, and rights of
property exercised and held by the cooperative at the time the
original articles expired.
(c) New articles of incorporation filed under this section must
recite the privileges, immunities, and rights of property exercised
and held by the cooperative at the time the original articles
expired.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 161.057. ORGANIZATIONAL MEETING. (a) After the

certificate of incorporation is issued, the incorporators of an
electric cooperative shall meet to adopt bylaws, elect officers, and
transact other business that properly comes before the meeting.
(b) A majority of the incorporators shall call the
organizational meeting.
(c) The incorporators calling the organizational meeting shall
give at least three days' notice of the meeting by mail to each
incorporator. The notice must state the time and place of the
meeting. The notice may be waived in writing.

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Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 161.058. PERFECTING DEFECTIVELY ORGANIZED CORPORATION.

(a) An electric cooperative that files defective articles of
incorporation or fails to take an action necessary to perfect its
corporate organization may:
(1) file corrected articles of incorporation or amend the
original articles; and
(2) take any action necessary to correct the defect.
(b) An action taken under this section is valid and binding on
any person concerned.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 161.059. NONPROFIT OPERATION. (a) An electric

cooperative shall operate without profit to its members.
(b) The rates, fees, rents, and other charges for electric
energy and other facilities, supplies, equipment, or services
furnished by the cooperative must be sufficient at all times to:
(1) pay all operating and maintenance expenses necessary or
desirable for the prudent conduct of its business;
(2) pay the principal of and interest on the obligations
issued or assumed by the cooperative in performing the purpose for
which the cooperative was organized; and
(3) create reserves.
(c) The cooperative shall devote its revenues:
(1) first to the payment of operating and maintenance
expenses and the principal and interest on outstanding obligations;
and
(2) then to the reserves prescribed by the board for
improvement, new construction, depreciation, and contingencies.
(d) The cooperative shall periodically return revenues not
required for the purposes prescribed by Subsection (c) to the members
in proportion to the amount of business done with each member during
the applicable period. The cooperative may return revenues:
(1) in cash, by abatement of current charges for electric
energy, or in another manner determined by the board; or
(2) through a general rate reduction to members.

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Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 161.060. MEMBERS NOT LIABLE FOR DEBTS OF ELECTRIC

COOPERATIVE. A member is not liable for a debt of an electric
cooperative except for:
(1) a debt contracted between the member and the
cooperative; or
(2) an amount not to exceed the unpaid amount of the
member's membership fee.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 161.061. LICENSE FEE. Not later than May 1 of each year,
each electric cooperative shall pay to the secretary of state a
license fee of $10.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 161.062. EXEMPTION FROM EXCISE TAXES. An electric

cooperative is exempt from all excise taxes but is exempt from the
franchise tax imposed by Chapter 171, Tax Code, only if the
cooperative is exempted by that chapter.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 161.063. EXEMPTION FROM APPLICATION OF SECURITIES ACT.

The Securities Act (Title 12, Government Code) does not apply to:
(1) an obligation issued to secure a debt of an electric
cooperative to the United States; or
(2) the issuance of a membership certificate by an electric
cooperative.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2019, 86th Leg., R.S., Ch. 491 (H.B. 4171), Sec. 2.42, eff.
January 1, 2022.

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Sec. 161.064. BYLAWS. (a) The board may adopt, amend, or

repeal the bylaws of the cooperative.
(b) The bylaws may contain any provision for the regulation and
management of the affairs of the electric cooperative that is
consistent with the articles of incorporation.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 161.065. MEMBERSHIP. (a) A person is eligible to become

a member of an electric cooperative if the person has a dwelling,
structure, apparatus, or point of delivery at which the person does
not receive central station service from another source and that is
located in an area in which the cooperative is authorized to provide
electric energy, and the person:
(1) uses or agrees to use electric energy or the
facilities, supplies, equipment, or services furnished by the
cooperative at the dwelling, structure, apparatus, or point of
delivery; or
(2) is an incorporator of the cooperative.
(b) An electric cooperative may become a member of another
electric cooperative and may fully use the facilities and services of
that cooperative.
(c) Membership in an electric cooperative is not transferable.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 161.066. CERTIFICATE OF MEMBERSHIP. (a) An electric

cooperative shall issue a certificate of membership to a member who
pays the member's membership fee in full.
(b) A certificate of membership is not transferable.
(c) A certificate of membership shall be surrendered to the
cooperative on the resignation, expulsion, or death of the member.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 161.067. MEETINGS OF MEMBERS. (a) An electric

cooperative may hold a meeting of its members at a place provided in
the bylaws. If the bylaws do not provide for a place for a meeting,

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 UTILITIES CODE

the cooperative shall hold the meeting in the principal office of the
cooperative in this state.
(b) An electric cooperative shall hold an annual meeting of its
members at the time provided in the bylaws. Failure to hold the
annual meeting at the designated time does not result in forfeiture
or dissolution of the cooperative.
(c) A special meeting of the members may be called by:
(1) the president;
(2) the board;
(3) a majority of the directors;
(4) the members by a petition signed by at least 10 percent
of the members; or
(5) an officer or other person as provided by the articles
of incorporation or bylaws.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 161.068. NOTICE OF MEMBERS' MEETING. (a) Written notice

of each meeting of the members shall be delivered to each member of
record, either personally or by mail, not earlier than the 30th day
or later than the 10th day before the date of the meeting. The
notice must be delivered by or at the direction of the president, the
secretary, or the officers or other persons calling the meeting.
(b) The notice must state the time and place of the meeting
and, in the case of a special meeting, each purpose for which the
meeting is called.
(c) A member may waive notice of meetings in writing.
(d) A notice that is mailed is considered to be delivered when
the notice is deposited in the United States mail in a sealed
envelope with postage prepaid addressed to the member at the member's
address as it appears on the records of the electric cooperative.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 161.069. QUORUM OF MEMBERS. Unless otherwise provided by

the articles of incorporation, a quorum for the transaction of
business at a meeting of the members of an electric cooperative is a
majority of the members present in person or represented by proxy.
If voting by mail is provided for in the bylaws, members voting by

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 UTILITIES CODE

mail are counted as present for purposes of determining whether a

quorum is present.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 161.070. VOTING BY MEMBERS. Each member present at a

meeting of the members is entitled to one vote on each matter
submitted to a vote at the meeting. The bylaws may provide for
voting by proxy or by mail.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 161.071. BOARD OF DIRECTORS. (a) The business and

affairs of an electric cooperative shall be managed by a board of
directors. The board consists of at least three directors. Each
director must be a member of the cooperative. The bylaws may
prescribe additional qualifications for directors.
(b) The board may exercise any power of an electric cooperative
not conferred on the members by this chapter or by the cooperative's
articles of incorporation or bylaws.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 161.072. ELECTION OF DIRECTORS; VACANCIES. (a) The

incorporators of an electric cooperative named in the articles of
incorporation shall serve as directors until the first annual meeting
of the members, and until their successors are elected and qualify.
Subsequently, the directors shall be elected by the members at each
annual meeting or as otherwise provided by the bylaws.
(b) A vacancy on the board shall be filled as provided by the
bylaws. A person selected to fill a vacancy serves until the next
regular election of directors.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 161.073. COMPENSATION OF DIRECTORS. A director of an

electric cooperative is entitled to the compensation and

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reimbursement for expenses actually and necessarily incurred by the

director as provided by the bylaws.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 161.074. QUORUM OF DIRECTORS. (a) A majority of the

directors is a quorum unless the articles of incorporation or the
bylaws provide that a greater number of the directors is a quorum.
(b) A majority of the directors present at a meeting at which a
quorum is present may exercise the board's authority unless the
articles of incorporation or the bylaws require a greater number of
directors to exercise the board's authority.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 161.075. BOARD MEETINGS. (a) The board shall hold a

regular or special board meeting at the place and on the notice
prescribed by the bylaws.
(b) The attendance of a director at a board meeting constitutes
a waiver of notice of the meeting unless the director attends the
meeting for the express purpose of objecting to the transaction of
business at the meeting because the meeting is not lawfully called or
convened.
(c) A notice or waiver of notice of a board meeting is not
required to specify the business to be transacted at the meeting or
the purpose of the meeting.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 161.076. OFFICERS, AGENTS, AND EMPLOYEES. (a) The board

shall elect from the board's membership a president, a vice
president, a secretary, and a treasurer. The terms of office,
powers, duties, and compensation of the officers elected under this
subsection shall be provided for by the bylaws.
(b) The same person may hold the offices of secretary and of
treasurer.
(c) The board may appoint other officers, agents, and employees
as the board considers necessary and shall prescribe the powers,

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duties, and compensation of those persons.

(d) The board may remove an officer, agent, or employee elected
or appointed by the board if the board determines that the removal
will serve the best interests of the cooperative.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 161.077. EXECUTIVE COMMITTEE. (a) The bylaws of an

electric cooperative may authorize the board to elect an executive
committee from the board's membership.
(b) The board may delegate to the executive committee the
management of the current and ordinary business of the cooperative
and other duties as prescribed by the bylaws.
(c) The designation of an executive committee and the
delegation of authority to the committee does not relieve the board
or any director of a responsibility imposed on the board or the
director by this chapter.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 161.078. INDEMNIFICATION. An electric cooperative may

indemnify and provide indemnity insurance in the same manner and to
the same extent as a nonprofit corporation under Article 2.22A, Texas
Non-Profit Corporation Act (Article 1396-2.22A, Vernon's Texas Civil
Statutes).

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 161.079. APPLICABILITY OF CHAPTER TO CORPORATIONS

ORGANIZED UNDER OTHER LAW. A cooperative or nonprofit corporation or
association organized under any other law of this state for the
purpose of engaging in rural electrification may, by a majority vote
of the members present in person or represented by proxy at a meeting
called for that purpose, amend its articles of incorporation to
comply with this chapter.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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SUBCHAPTER C. POWERS OF ELECTRIC COOPERATIVE

Sec. 161.121. GENERAL POWERS. An electric cooperative may:
(1) sue and be sued in its corporate name;
(2) adopt and alter a corporate seal and use the seal or a
facsimile of the seal as required by law;
(3) acquire, own, hold, maintain, exchange, or use property
or an interest in property, including plants, buildings, works,
machinery, supplies, equipment, apparatus, and transmission and
distribution lines or systems that are necessary, convenient, or
useful;
(4) dispose of, mortgage, or lease as lessor any of its
property or assets;
(5) borrow money and otherwise contract indebtedness, issue
obligations for its indebtedness, and secure the payment of
indebtedness by mortgage, pledge, or deed of trust on any or all of
its property or revenue;
(6) accept gifts or grants of money, services, or property;
(7) make any contracts necessary or convenient for the
exercise of the powers granted by this chapter;
(8) conduct its business and have offices inside or outside
this state;
(9) adopt and amend bylaws not inconsistent with the
articles of incorporation for the administration and regulation of
the affairs of the cooperative; and
(10) perform any other acts for the cooperative or its
members or for another electric cooperative or its members, and
exercise any other power, that may be necessary, convenient, or
appropriate to accomplish the purpose for which the cooperative is
organized, including other or additional purposes that benefit
members and nonmembers, either directly or through affiliates,
described in Section A, Article 2.01, Texas Non-Profit Corporation
Act (Article 1396-2.01, Vernon's Texas Civil Statutes).

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 62, Sec. 18.15(a), eff. Sept. 1, 1999.

Sec. 161.122. PROVISION OF RURAL ELECTRIFICATION. An electric

cooperative may engage in rural electrification by:
(1) furnishing electric energy to any person for delivery

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to a dwelling, structure, apparatus, or point of delivery that is:

(A) located in a rural area; and
(B) not receiving central station service, even if the
person is receiving central station service at other points of
delivery;
(2) furnishing electric energy to a person desiring that
service in a municipality or unincorporated city or town, rural or
nonrural, served by the cooperative and in which central station
service was not available at the time the cooperative began
furnishing electric energy to the residents of the municipality or
unincorporated city or town;
(3) assisting in the wiring of the premises of persons in
rural areas or the acquisition, supply, or installation of electrical
or plumbing equipment in those premises; or
(4) furnishing electric energy, wiring facilities, or
electrical or plumbing equipment or service to another electric
cooperative or to the members of another electric cooperative.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 161.123. POWERS RELATING TO PROVISION OF ELECTRIC ENERGY.

An electric cooperative may:
(1) generate, acquire, and accumulate electric energy and
transmit, distribute, sell, furnish, and dispose of that electric
energy to its members only;
(2) assist its members only to wire their premises and
install in those premises electrical and plumbing fixtures,
machinery, supplies, apparatus, and equipment of any kind, and in
connection with those activities:
(A) acquire, lease, sell, distribute, install, and
repair electrical and plumbing fixtures, machinery, supplies,
apparatus, and equipment of any kind; and
(B) receive, acquire, endorse, pledge, and dispose of
notes, bonds, and other evidences of indebtedness;
(3) furnish to other electric cooperatives or their members
electric energy, wiring facilities, electrical and plumbing
equipment, and services that are convenient or useful; and
(4) establish, regulate, and collect rates, fees, rents, or
other charges for electric energy or other facilities, supplies,

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equipment, or services furnished by the electric cooperative.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 161.124. PROVISION OF ELECTRIC ENERGY TO CERTAIN NONMEMBER

ENTITIES. An electric cooperative may generate, acquire, and
accumulate electric energy and transmit, distribute, sell, furnish,
and dispose of that electric energy to any of the following that is
engaged in the generation, transmission, or distribution of
electricity:
(1) a corporation, association, or firm;
(2) the United States;
(3) this state or a political subdivision of this state;
or
(4) a municipal power agency or political subdivision of
this state that is a co-owner with the electric cooperative of an
electric generation facility.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 161.125. EMINENT DOMAIN. An electric cooperative may

exercise the power of eminent domain in the manner provided by state
law for acquiring private property for public use. The power does
not apply to state property or property of a political subdivision in
this state.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER D. AMENDMENT OF ARTICLES OF INCORPORATION

Sec. 161.151. AMENDMENT OF ARTICLES OF INCORPORATION. (a) An
electric cooperative may amend its articles of incorporation by a
majority vote of the members of the cooperative present in person or
represented by proxy at a regular meeting or at a special meeting of
its members called for that purpose as provided by the bylaws.
(b) Notice of the meeting to members must state the general
nature of each proposed amendment to be presented and voted on at the
meeting. Valid action may not be taken at the meeting unless at
least five percent of the members of the electric cooperative either

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attend the meeting in person or are represented at the meeting by

proxy.
(c) The power to amend the articles of incorporation includes
the power to accomplish any desired change in the articles of
incorporation and to include any purpose, power, or provision that is
permitted to be included in original articles of incorporation
executed at the time the amendment is made.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 161.152. ARTICLES OF AMENDMENT. (a) Articles of

amendment of an electric cooperative must be:
(1) signed by the president or vice president and attested
by the secretary, certifying to the amendment and its lawful
adoption; and
(2) executed, acknowledged, filed, and recorded in the same
manner as the original articles of incorporation.
(b) An amendment takes effect when the secretary of state
accepts the articles of amendment for filing and recording and issues
a certificate of amendment. The certificate of amendment is evidence
of the filing of the amendment.
(c) The secretary of state shall charge and collect a fee of
$2.50 for filing articles of amendment and issuing a certificate of
amendment.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER E. CONSOLIDATION OF ELECTRIC COOPERATIVES

Sec. 161.201. CONSOLIDATION. (a) Two or more electric
cooperatives may enter into an agreement to consolidate the
cooperatives. The agreement must state:
(1) the terms of the consolidation;
(2) the name of the proposed consolidated cooperative;
(3) the number of directors of the proposed consolidated
cooperative;
(4) the time of the annual meeting and election; and
(5) the names of at least three persons to be directors
until the first annual meeting.
(b) A consolidation agreement may be approved only on the votes

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of a majority of the members of each electric cooperative present in

person or represented by proxy at a regular meeting or at a special
meeting of its members called for that purpose.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 161.202. ARTICLES OF CONSOLIDATION. (a) The articles of

consolidation must:
(1) conform substantially to original articles of
incorporation of an electric cooperative; and
(2) be executed, acknowledged, filed, and recorded in the
same manner as original articles of incorporation.
(b) The directors named in the consolidation agreement shall as
incorporators sign and acknowledge the articles of consolidation.
(c) The secretary of state shall charge and collect a fee of
$10 for filing articles of consolidation and issuing a certificate of
consolidation.
(d) When the secretary of state accepts the articles of
consolidation for filing and recording and issues a certificate of
consolidation, the proposed consolidated electric cooperative
described in the articles under its designated name exists as a body
corporate, with all the powers of an electric cooperative originally
organized under this chapter.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER F. DISSOLUTION
Sec. 161.251. DISSOLUTION. (a) An electric cooperative may be
dissolved by a majority vote of its members present in person or
represented by proxy at a regular meeting or at a special meeting of
its members called for that purpose.
(b) A certificate of dissolution must be:
(1) signed by the president or vice president and attested
by the secretary, certifying to the dissolution and stating that the
officers have been authorized by a vote of the members under
Subsection (a) to execute and file the certificate; and
(2) executed, acknowledged, filed, and recorded in the same
manner as original articles of incorporation of an electric
cooperative.

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(c) The cooperative is dissolved when the secretary of state

accepts the certificate of dissolution for filing and recording and
issues a certificate of dissolution.
(d) The secretary of state shall charge and collect a fee of
$2.50 for filing articles of dissolution.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 161.252. EXISTENCE FOLLOWING DISSOLUTION. (a) A

dissolved electric cooperative continues to exist to:
(1) satisfy existing liabilities or obligations;
(2) collect or liquidate its assets; and
(3) take any other action required to adjust and wind up
its business and affairs.
(b) A dissolved electric cooperative may sue and be sued in its
corporate name.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 161.253. DISTRIBUTION OF NET ASSETS ON DISSOLUTION.

Assets of a dissolved electric cooperative that remain after all
liabilities or obligations of the cooperative have been satisfied
shall be distributed pro rata to the members of the cooperative who
were members when the certificate of dissolution was filed.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 161.254. DISSOLUTION OF DEFECTIVELY INCORPORATED ELECTRIC

COOPERATIVE. (a) An electric cooperative that purports to have been
incorporated or reincorporated under this chapter but that has not
complied with a requirement for legal corporate existence may file a
certificate of dissolution in the same manner as a validly
incorporated electric cooperative.
(b) The certificate of dissolution may be authorized by a
majority of the incorporators or directors at a meeting called by an
incorporator and held at the principal office of the cooperative
named in the articles of incorporation.
(c) The incorporator calling the meeting must give at least 10

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days' notice of the meeting by mail to the last known post office
address of each incorporator or director.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

CHAPTER 162. TELEPHONE COOPERATIVE CORPORATIONS

SUBCHAPTER A. GENERAL PROVISIONS
Sec. 162.001. SHORT TITLE. This chapter may be cited as the
Telephone Cooperative Act.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 162.002. PURPOSE. A cooperative, nonprofit corporation

may be organized under this chapter to furnish communication service
to the widest practicable number of users of that service.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 162.003. DEFINITIONS. In this chapter:

(1) "Board" means the board of directors of a telephone
cooperative.
(2) "Communication service" means:
(A) the transmission or reception of information,
signals, or messages by any means, including by wire, radio, cellular
radio, microwave, or fiber optics; and
(B) the provision of lines, facilities, and systems
used in the transmission or reception described by Paragraph (A).
(3) "Member" means:
(A) an incorporator of a telephone cooperative; or
(B) a person admitted to membership in a telephone
cooperative as provided by Section 162.065.
(4) "Patron" means a member who is eligible to receive
patronage dividends or to earn capital credits as a result of
purchasing certain services from a telephone cooperative as provided
by Section 162.066.
(5) "Telephone cooperative" means a corporation that is
organized under this chapter or that becomes subject to this chapter
as provided by this chapter.

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Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 162.004. CERTAIN CORPORATE NAMES PROHIBITED. A

corporation organized under the laws of this state or authorized to
do business in this state may not use the words "telephone
cooperative" in the corporation's name unless the corporation is
organized under this chapter.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 162.005. EFFECT OF RECORDING CERTAIN MORTGAGES EXECUTED BY

TELEPHONE COOPERATIVES. (a) An instrument executed by a telephone
cooperative or a foreign corporation doing business in this state
under this chapter that affects real and personal property and that
is recorded in the real property records of any county in which the
property is located or is to be located has the same effect as if the
instrument were also recorded as provided by law in the proper office
in that county as a mortgage of personal property.
(b) All after-acquired property of a telephone cooperative or
foreign corporation doing business in this state under this chapter
described by or referred to as being pledged in an instrument to
which Subsection (a) applies becomes subject to the lien described by
the instrument immediately when the cooperative or corporation
acquires the property, without regard to whether the property existed
at the time the instrument was executed. The execution of the
instrument constitutes notice and otherwise has the same effect with
respect to after-acquired property to which this subsection applies
as it has under the laws relating to recordation with respect to
property that is owned by the cooperative or foreign corporation at
the time the instrument is executed and that is described in the
instrument as being pledged by the instrument.
(c) After a lien on personal property under an instrument to
which Subsection (a) applies is recorded, the lien continues in
existence and of record for the period specified in the instrument
without:
(1) the refiling of the instrument; or
(2) the filing of any renewal certificate, affidavit, or
other supplemental information required by a law relating to the

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renewal, maintenance, or extension of a lien on personal property.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 162.006. CONSTRUCTION STANDARDS. A telephone cooperative

that constructs communication lines or facilities must at a minimum
comply with the standards of the National Electrical Safety Code in
effect at the time of construction.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER B. CREATION AND OPERATION OF TELEPHONE COOPERATIVES

Sec. 162.051. INCORPORATORS. (a) Three or more individuals
may act as incorporators of a telephone cooperative by executing
articles of incorporation as provided by this chapter.
(b) An incorporator must:
(1) be at least 21 years of age; and
(2) reside in this state.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 162.052. DURATION OF CORPORATION. A telephone cooperative

may be created as a perpetual corporation.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 162.053. NAME OF TELEPHONE COOPERATIVE. The name of a

telephone cooperative must:
(1) include the words "telephone" and "cooperative" and the
abbreviation "Inc."; and
(2) be distinct from the name of any other corporation
organized under the laws of or authorized to do business in this
state.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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Sec. 162.054. ARTICLES OF INCORPORATION. (a) The articles of

incorporation of a telephone cooperative must:
(1) state that the articles are executed under this
chapter;
(2) be signed by each incorporator and acknowledged by at
least two incorporators; and
(3) state:
(A) the name of the cooperative;
(B) the purpose for which the cooperative is formed;
(C) the name and address of each incorporator;
(D) the number of directors;
(E) the address of the cooperative's principal office
and the name and address of its agent on whom process may be served;
(F) the duration of the cooperative;
(G) the terms under which a person is admitted to
membership and retains membership in the cooperative, unless the
articles expressly state that the determination of membership matters
is reserved to the directors by the bylaws; and
(H) any provisions that the incorporators include for
the regulation of the business and the conduct of the affairs of the
cooperative.
(b) The articles of incorporation do not need to state any of
the corporate powers enumerated in this chapter.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 162.055. FILING AND RECORDING OF ARTICLES OF

INCORPORATION. (a) The secretary of state shall receive articles of
incorporation of a telephone cooperative if the incorporators of the
cooperative:
(1) apply for filing the articles;
(2) furnish satisfactory evidence of compliance with this
chapter to the secretary of state; and
(3) pay a fee of $25.
(b) The secretary of state shall:
(1) file the articles of incorporation in the secretary's
office;
(2) record the articles at length in a book to be kept for
that purpose;

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(3) retain the original articles of incorporation on file

in the secretary's office; and
(4) issue a certificate showing the recording of the
articles of incorporation and the telephone cooperative's authority
to do business under the articles.
(c) A copy of the articles of incorporation or of the record of
the articles, certified under the state seal, is evidence of the
creation of the telephone cooperative.
(d) The existence of the telephone cooperative dates from the
filing of the articles in the office of the secretary of state. The
certificate of the secretary of state is evidence of that filing.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 162.056. REVIVAL OF ARTICLES OF INCORPORATION. (a) If

the articles of incorporation of a telephone cooperative expire by
limitation, the cooperative, with the consent of a majority of its
members, may revive the articles by filing:
(1) new articles of incorporation under this chapter; and
(2) a certified copy of the expired original articles.
(b) A telephone cooperative that revives its articles of
incorporation has all the privileges, immunities, and rights of
property exercised and held by the cooperative at the time the
original articles expired.
(c) New articles of incorporation filed under this section must
recite the privileges, immunities, and rights of property exercised
and held by the cooperative at the time the original articles
expired.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 162.057. ORGANIZATIONAL MEETING. (a) After the

certificate of incorporation is issued, the incorporators of a
telephone cooperative shall meet to adopt bylaws, elect officers, and
transact other business that properly comes before the meeting.
(b) A majority of the incorporators shall call the
organizational meeting.
(c) The incorporators calling the organizational meeting shall
give at least three days' notice of the meeting by mail to each

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incorporator. The notice must state the time and place of the
meeting. The notice may be waived in writing.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 162.058. PERFECTING DEFECTIVELY ORGANIZED CORPORATIONS.

(a) A telephone cooperative that files defective articles of
incorporation or fails to take an action necessary to perfect its
corporate organization may:
(1) file corrected articles of incorporation or amend the
original articles; and
(2) take any action necessary to correct the defect.
(b) An action taken under this section is valid and binding on
any person concerned.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 162.059. NONPROFIT OPERATION. (a) A telephone

cooperative shall be operated on a nonprofit basis for the mutual
benefit of its members and patrons.
(b) A cooperative's bylaws and its contracts with members and
patrons must contain appropriate provisions relating to the
disposition of revenues and receipts to establish and maintain the
cooperative's nonprofit and cooperative character.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 162.060. MEMBERS NOT LIABLE FOR DEBTS OF TELEPHONE

COOPERATIVE. A member is not liable for a debt of a telephone
cooperative, and the member's property is not subject to execution
for that debt.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 162.061. LICENSE FEE. Not later than July 1 of each year,
each telephone cooperative doing business in this state shall pay to
the secretary of state a fee of $10.

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Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 162.062. EXEMPTION FROM EXCISE TAXES. A telephone

cooperative doing business in this state is exempt from all excise
taxes but is exempt from the franchise tax imposed by Chapter 171,
Tax Code, only if the cooperative is exempted by that chapter.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 162.063. EXEMPTION FROM APPLICATION OF SECURITIES ACT.

The Securities Act (Title 12, Government Code) does not apply to:
(1) a note, bond, or other evidence of indebtedness issued
by a telephone cooperative doing business in this state to the United
States;
(2) an instrument executed to secure a debt of a telephone
cooperative to the United States; or
(3) the issuance of a membership certificate by a telephone
cooperative or a foreign corporation doing business in this state
under this chapter.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2019, 86th Leg., R.S., Ch. 491 (H.B. 4171), Sec. 2.43, eff.
January 1, 2022.

Sec. 162.064. BYLAWS. (a) The board shall adopt the initial
bylaws of a telephone cooperative to be adopted following:
(1) an incorporation;
(2) a consolidation; or
(3) an amendment by an existing cooperative, corporation,
or association of its articles of incorporation as provided by
Section 162.082.
(b) After the initial bylaws are adopted, the members may
adopt, amend, or repeal the bylaws by the affirmative vote of a
majority of those members voting on the question at a meeting of the
members.
(c) The bylaws may contain any provision for the regulation and
management of the affairs of the telephone cooperative that is

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consistent with the articles of incorporation.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 162.065. MEMBERSHIP. (a) Each incorporator of a

telephone cooperative is a member of the cooperative. A person other
than an incorporator may become a member of a telephone cooperative
only if the person agrees to use communication service furnished by
the cooperative when that service is made available through the
cooperative's facilities. The bylaws may prescribe additional
qualifications and limitations with respect to membership.
(b) Membership in a telephone cooperative is evidenced by a
certificate of membership. A membership certificate must contain the
provisions, consistent with this chapter and the articles of
incorporation, that are prescribed by the cooperative's bylaws. A
certificate may be transferred only as provided by the bylaws.
(c) A telephone cooperative may become a member of another
telephone cooperative and may fully use the facilities and services
of that cooperative.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 162.066. PATRONS. (a) A member is a patron of a

telephone cooperative if the member purchases local
telecommunications service or toll telecommunications service or pays
end user access charges in the ordinary course of business of the
cooperative.
(b) The use of interexchange access, payment of interexchange
access fees or settlements, or purchase of equipment does not qualify
a member or other person as a patron.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 162.067. MEETINGS OF MEMBERS. (a) A telephone

cooperative shall hold an annual meeting of members at the time and
place provided by the bylaws. Failure to hold the annual meeting at
the designated time does not result in forfeiture or dissolution of
the cooperative.

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(b) A special meeting of the members may be called by:

(1) the president;
(2) the board;
(3) any three directors; or
(4) the lesser of:
(A) 200 members; or
(B) 10 percent of all the members.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 162.068. NOTICE OF MEMBERS' MEETING. (a) Except as

otherwise provided by this chapter, written notice of each meeting of
the members shall be given to each member, either personally or by
mail, not earlier than the 25th day or later than the 10th day before
the date of the meeting.
(b) The notice must state the time and place of the meeting
and, in the case of a special meeting, each purpose for which the
meeting is called.
(c) A notice that is mailed is considered to have been given
when the notice is deposited in the United States mail with postage
prepaid addressed to the member at the member's address as it appears
on the records of the telephone cooperative.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 162.069. WAIVER OF NOTICE. A person entitled to notice of

a meeting may waive notice in writing either before or after the
meeting. If a person entitled to notice of a meeting attends the
meeting, the person's attendance constitutes a waiver of notice of
the meeting, unless the person participates in the meeting solely to
object to the transaction of business because the meeting is not
legally called or convened.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 162.070. MEMBERS' MEETING: QUORUM AND VOTING. (a)

Unless the bylaws prescribe a greater percentage or number of members
for a quorum, a quorum at a meeting of the members of a telephone

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cooperative is the personal presence of:

(1) 10 percent of all members, if the cooperative has 500
or fewer members; or
(2) the greater of 50 members or two percent of all
members, if the cooperative has more than 500 members.
(b) If fewer than a quorum are present at a meeting, a majority
of the members present in person may adjourn the meeting from time to
time without further notice.
(c) Each member present at a meeting of the members is entitled
to one vote on each matter submitted to a vote at the meeting.
Voting must be in person unless the bylaws provide for voting by
mail.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 162.071. BOARD OF DIRECTORS. (a) A board of at least

five directors shall manage the business of a telephone cooperative.
Each director must be a member of the cooperative. The bylaws must
prescribe the number of directors and their qualifications other than
those prescribed by this chapter.
(b) The board may exercise any power of a telephone cooperative
not conferred on the members by this chapter or by the cooperative's
articles of incorporation or bylaws.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 162.072. ELECTION OF DIRECTORS; TERMS. (a) The

incorporators of a telephone cooperative named in the articles of
incorporation shall serve as directors and hold office until the
first annual meeting of the members and until their successors are
elected and qualify.
(b) At each annual meeting or, in the case of failure to hold
the annual meeting as specified in the bylaws, at a special meeting
called for that purpose, the members shall elect directors to hold
office until the next annual members' meeting, except as otherwise
provided by this chapter. Except as provided by Subsection (e), each
director holds office for the term for which the person is elected
and until the person's successor is elected and qualifies.
(c) Instead of electing all the directors annually, the bylaws

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may provide that the directors, other than those named in the
articles of incorporation to serve until the first annual meeting of
the members, are elected by the members for a term of two years or
three years. The terms must be set so that:
(1) one-half of the directors, as nearly as possible, are
elected annually, if a two-year term is provided; or
(2) one-third of the directors, as nearly as possible, are
elected annually, if a three-year term is provided.
(d) After the implementation of two-year or three-year terms
for directors, as directors' terms expire, the members shall elect
their successors to serve until the second or third succeeding annual
meeting after their election, as appropriate.
(e) The bylaws must prescribe the manner of electing a
successor to a director who resigns, dies, or otherwise becomes
incapable of acting. The bylaws may provide for the removal of a
director from office and for the election of the director's
successor.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 162.073. COMPENSATION OF DIRECTORS. (a) A director may

not receive a salary for services as a director. Except in an
emergency, a director may not receive a salary for services in a
capacity other than director without the approval of the members.
(b) The bylaws may:
(1) prescribe a fixed fee for attendance at each board
meeting, committee meeting, industry-related conference approved by
the board, or training program; and
(2) provide for reimbursement of actual expenses of
attendance or a reasonable per diem.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 162.074. INSURANCE FOR DIRECTORS. A telephone cooperative

may provide liability, accident, life, and health insurance coverage
for a director who chooses to have that coverage.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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Sec. 162.075. BOARD MEETINGS; QUORUM. (a) The bylaws shall

prescribe the manner of holding board meetings.
(b) A majority of the directors is a quorum.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 162.076. DISTRICTS. (a) The bylaws may provide for the
territory served or to be served by a telephone cooperative to be
divided into two or more districts for any purpose, including the
nomination and election of directors and the election and functioning
of district delegates.
(b) The bylaws must prescribe:
(1) the boundaries of each district or the manner of
establishing a district's boundaries;
(2) the manner of changing a district's boundaries; and
(3) the manner in which each district functions.
(c) District delegates may nominate and elect directors. A
district delegate must be a member.
(d) A member may not vote by proxy or by mail at a district
meeting.
(e) A district delegate may not vote by proxy or by mail at any
meeting.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 162.077. OFFICERS, AGENTS, AND EMPLOYEES. (a) The board

of a telephone cooperative shall annually elect from the board's
membership a president, a vice president, a secretary, and a
treasurer.
(b) An officer who ceases to be a director ceases to hold
office.
(c) The same person may hold the offices of secretary and of
treasurer.
(d) The board may also elect or appoint other officers, agents,
or employees as the board considers appropriate and shall prescribe
the powers and duties of those persons.
(e) An officer may be removed from office and a successor
elected in the manner prescribed by the bylaws.

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Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 162.078. EXECUTIVE COMMITTEE. (a) The bylaws of a

telephone cooperative may authorize the board to elect an executive
committee from the board's membership.
(b) The board may delegate to the executive committee the
management of the current and ordinary business of the cooperative
and other duties as prescribed by the bylaws.
(c) The designation of an executive committee and the
delegation of authority to the committee does not relieve the board
or any director of a responsibility imposed on the board or the
director by this chapter.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 162.079. INDEMNIFICATION. Article 2.22A, Texas Non-Profit

Corporation Act (Article 1396-2.22A, Vernon's Texas Civil Statutes),
applies to a telephone cooperative in the same manner as if the
cooperative were formed under the Texas Non-Profit Corporation Act.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 162.080. CHANGE OF LOCATION OF PRINCIPAL OFFICE. (a) A

telephone cooperative may, with the authorization of the board or the
members, change the location of its principal office by filing a
certificate reciting the change of principal office with the
secretary of state.
(b) The cooperative's president or vice president must execute
and acknowledge the certificate under the cooperative's seal as
attested by the secretary.
(c) The secretary of state shall charge and collect a fee of $5
for filing a certificate of change of principal office.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 162.081. DIRECTOR, OFFICER, OR MEMBER ACTING AS NOTARY. A

person who is an officer, director, or member of a telephone

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cooperative and who is authorized to take acknowledgments under state

law is not disqualified because of the person's association with the
cooperative from taking an acknowledgment of an instrument executed
in favor of the cooperative or to which the cooperative is a party.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 162.082. APPLICABILITY TO CORPORATIONS ORGANIZED UNDER

OTHER LAW. A cooperative or nonprofit corporation or association
organized under any other law of this state for the purpose of
furnishing communication service may, by a majority vote of the
members present in person at a meeting called for that purpose, amend
its articles of incorporation to comply with this chapter.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER C. POWERS OF TELEPHONE COOPERATIVE

Sec. 162.121. GENERAL POWERS. A telephone cooperative may:
(1) sue and be sued in its corporate name;
(2) adopt and alter a corporate seal and use the seal or a
facsimile of the seal as required by law;
(3) construct, acquire, lease, improve, install, equip,
maintain, and operate, and, subject to Sections 162.125 and 162.126,
dispose of, lease, or encumber, communication lines, facilities or
systems, lands, structures, plants and equipment, exchanges, and
other property, considered appropriate to accomplish the purpose for
which the cooperative is organized;
(4) issue membership certificates as provided by this
chapter;
(5) borrow money and otherwise contract indebtedness, issue
or guarantee notes, bonds, and other evidences of indebtedness, and
secure the payment of indebtedness by pledge or other encumbrance on
any or all of its property or revenue;
(6) conduct its business and exercise its powers inside or
outside this state;
(7) adopt, amend, and repeal bylaws;
(8) make any contracts appropriate for the full exercise of
the powers granted by this chapter; and
(9) perform any other acts and exercise any other power

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that may be appropriate to accomplish the purpose for which the

cooperative is organized.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 162.122. POWERS RELATING TO PROVISION OF COMMUNICATION

SERVICE. (a) A telephone cooperative may:
(1) furnish and improve communication service to its
members, to governmental agencies and political subdivisions, to any
number of subscribers of other communication systems through
interconnection of facilities, and to any number of users through pay
stations;
(2) connect and interconnect its communication lines,
facilities, or systems with other communication lines, facilities, or
systems;
(3) make its facilities available to persons furnishing
communication service inside or outside this state; and
(4) construct, maintain, and operate a communication line
along, on, under, or across publicly owned land or a public
thoroughfare, subject to the same restrictions and obligations that
apply to an electric transmission cooperative under Subchapter C,
Chapter 181.
(b) A telephone cooperative that acquires communication
facilities may continue to furnish service to a person who is already
receiving service from those facilities without requiring the person
to become a member, but the person may become a member on the terms
prescribed by the bylaws.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 162.123. CONNECTION AND INTERCONNECTION OF FACILITIES. A

telephone cooperative doing business in this state may require a
person furnishing communication service to the public in this state
to interconnect that person's lines, facilities, or systems with, or
otherwise make available those lines, facilities, or systems to, the
cooperative's communication lines, facilities, or systems to provide
a continuous line of communication for the cooperative's subscribers.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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Sec. 162.124. EMINENT DOMAIN. A telephone cooperative may

exercise the power of eminent domain in the manner provided by state
law for the exercise of that power by other corporations constructing
or operating communication lines, facilities, or systems.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 162.125. ENCUMBRANCE AND DISPOSITION OF PROPERTY WITHOUT

MEMBERS' AUTHORIZATION. (a) The board of a telephone cooperative
may, without authorization of the members, authorize the execution
and delivery of a mortgage or deed of trust of or the encumbering of
any property of the cooperative, including property to be acquired
and the revenues from property of the cooperative, to secure any
indebtedness of the cooperative to the United States or any lending
institution licensed by the United States or a state.
(b) A mortgage or deed of trust described by Subsection (a) is
exempt from a tax for recording the instrument.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 162.126. ENCUMBRANCE, LEASE, AND DISPOSITION OF PROPERTY

WITH MEMBERS' AUTHORIZATION. (a) Except as provided by Section
162.125, a telephone cooperative may not dispose of, lease, or
encumber all or a major portion of its property unless the
disposition, lease, or encumbrance is authorized by the affirmative
vote of at least two-thirds of all the members of the cooperative.
(b) The board may, on the authorization of two-thirds of all
the members of the cooperative at a members' meeting, dispose of or
lease all or a major portion of its property to:
(1) another telephone cooperative;
(2) a foreign corporation doing business in this state
under this chapter; or
(3) the holder of a note, bond, or other evidence of
indebtedness issued to the United States or to a lending institution
licensed by the United States or a state.
(c) The notice of a meeting at which a disposition or lease
under Subsection (b) is to be considered must state the proposed

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action.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER D. AMENDMENT OF ARTICLES OF INCORPORATION

Sec. 162.151. AMENDMENT OF ARTICLES OF INCORPORATION. A
telephone cooperative may amend its articles of incorporation in
accordance with this subchapter.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 162.152. PRESENTATION AND APPROVAL OF PROPOSED AMENDMENT.

(a) A proposed amendment to the articles of incorporation must be
presented to a meeting of the members. The notice of the meeting
must state the proposed amendment or must have the proposed amendment
attached to it.
(b) A proposed amendment, with any changes, may be approved
only on the affirmative vote of at least two-thirds of the members
voting on the question at the meeting.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 162.153. ARTICLES OF AMENDMENT. (a) The president or

vice president, on behalf of the telephone cooperative, shall execute
and acknowledge the approved articles of amendment. The
cooperative's seal must be affixed to the articles of amendment and
attested by its secretary.
(b) The articles of amendment must state:
(1) that the articles of amendment are executed under this
chapter;
(2) the name of the telephone cooperative;
(3) the address of the cooperative's principal office; and
(4) the amendment to the articles of incorporation.
(c) The president or vice president executing the articles of
amendment shall make and attach to the articles an affidavit stating
that the cooperative complied with this subchapter with respect to
the amendment set forth in the articles.

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Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 162.154. FILING OF ARTICLES OF AMENDMENT. (a) Articles

of amendment shall be filed with the secretary of state in the same
manner as the original articles of incorporation.
(b) The secretary of state shall charge and collect a fee of
$25 for filing articles of amendment.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER E. CONSOLIDATION OR MERGER OF TELEPHONE COOPERATIVES

Sec. 162.201. CONSOLIDATION. (a) Two or more telephone
cooperatives may enter into an agreement to consolidate the
cooperatives. The agreement must state:
(1) the terms of the consolidation;
(2) the name of the proposed consolidated cooperative;
(3) the number of directors of the proposed consolidated
cooperative;
(4) the time of the annual meeting and election; and
(5) the names of at least five persons to be directors
until the first annual meeting.
(b) A consolidation agreement may be approved only on the votes
of a majority of the members of each telephone cooperative at a
regular meeting or at a special meeting of its members called for
that purpose.
(c) Telephone cooperatives may not consolidate for the purpose
of duplicating the facilities of another communication company where
the other communication company is giving or is willing to give
reasonably adequate communication service.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 162.202. ARTICLES OF CONSOLIDATION. (a) The articles of

consolidation must:
(1) conform substantially to original articles of
incorporation of a telephone cooperative; and
(2) be executed, acknowledged, filed, and recorded in the
same manner as original articles of incorporation.

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(b) The directors named in the consolidation agreement shall as

incorporators sign and acknowledge the articles of consolidation.
(c) The secretary of state shall charge and collect a fee of
$50 for filing articles of consolidation.
(d) When the secretary of state accepts the articles of
consolidation for filing and recording and issues a certificate of
consolidation, the proposed consolidated telephone cooperative
described in the articles under its designated name exists as a body
corporate, with all the powers of a telephone cooperative originally
organized under this chapter.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 162.203. MERGER. (a) One or more telephone cooperatives

may merge into another cooperative as provided by this section and
Section 162.204.
(b) The proposition for the merger and proposed articles of
merger must be submitted at a meeting of the members of each merging
cooperative and the surviving cooperative. A copy of the proposed
articles of merger must be attached to the notice of each meeting.
(c) A proposed merger and proposed articles of merger, with any
amendments, may be approved only on the affirmative vote of at least
two-thirds of the members of each cooperative voting on the proposed
merger and articles.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 162.204. ARTICLES OF MERGER. (a) The president or vice

president of each telephone cooperative, on behalf of the telephone
cooperative, shall execute and acknowledge the approved articles of
merger. The cooperative's seal must be affixed to the articles of
merger and attested by its secretary.
(b) The articles of merger must state:
(1) that they are executed under this chapter;
(2) the name of each merging cooperative and the address of
its principal office;
(3) the name of the surviving cooperative and the address
of its principal office;
(4) that each merging cooperative and the surviving

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cooperative agree to the merger;

(5) the name and address of each director of the surviving
cooperative;
(6) the terms of the merger and the manner in which the
merger will be carried out, including the manner in which members of
the merging cooperatives become or may become members of the
surviving cooperative;
(7) the duration of the surviving cooperative; and
(8) the purpose for which the surviving cooperative is
formed.
(c) The articles of merger may contain any provision consistent
with this chapter considered appropriate for the conduct of the
business of the surviving cooperative. The president or vice
president of each cooperative executing the articles of merger shall
make and attach to the articles an affidavit stating that the
cooperative complied with this subchapter with respect to the
articles.
(d) The original and a copy of the articles of merger shall be
delivered to the secretary of state. If the secretary of state finds
that the articles conform to law, the secretary of state, on payment
of a fee of $50, shall:
(1) file and record the articles of merger;
(2) issue a certificate of merger; and
(3) attach to the certificate of merger the copy of the
articles of merger and deliver the certificate and attached copy to
the surviving cooperative or its representative.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 162.205. EFFECT OF CONSOLIDATION OR MERGER. (a) In a

consolidation the existence of each telephone cooperative ceases and
the articles of consolidation are considered to be the articles of
incorporation of the new cooperative. In a merger the separate
existence of each merging telephone cooperative ceases and the
articles of incorporation of the surviving cooperative are considered
to be amended to the extent, if any, that amendment is provided for
in the articles of merger.
(b) All the rights, privileges, immunities, property, and
applications for membership of each of the consolidating or merging

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cooperatives are transferred to and vested in the new or surviving

cooperative, except that this chapter does not relieve a cooperative
of the obligation to comply with the applicable provisions of Title
2.
(c) The new or surviving cooperative is liable for all the
liabilities and obligations of the consolidating or merging
cooperatives. A claim existing or action or proceeding pending by or
against a consolidating or merging cooperative may be prosecuted as
if the consolidation or merger had not taken place, and the new or
surviving cooperative may be substituted in the place of the
consolidating or merging cooperative. The consolidation or merger
does not impair the rights of creditors of or liens on the property
of a consolidating or merging cooperative.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER F. CONVERSION OF CORPORATION INTO TELEPHONE COOPERATIVE

Sec. 162.251. CONVERSION OF CORPORATION INTO TELEPHONE
COOPERATIVE. (a) A corporation organized under the laws of this
state that furnishes or is authorized to furnish communication
service may be converted into a telephone cooperative in accordance
with this subchapter. On conversion, the corporation is subject to
this chapter as if it had been originally organized under this
chapter.
(b) The proposition for the conversion and proposed articles of
conversion must be submitted at a meeting of the members or
stockholders of the corporation or, in the case of a corporation that
does not have members or stockholders, at a meeting of the
incorporators of the corporation. A copy of the proposed articles of
conversion must be attached to the notice of the meeting.
(c) A proposed conversion and proposed articles of conversion,
with any amendments, may be approved only on the affirmative vote of:
(1) at least two-thirds of the members of the corporation
voting on the proposed conversion and articles;
(2) the holders of at least two-thirds of the shares of the
capital stock of the corporation represented at the meeting and
voting on the proposition and articles, if the corporation is a stock
corporation; or
(3) at least two-thirds of the corporation's incorporators,

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 UTILITIES CODE

if the corporation does not have members or outstanding shares of

capital stock.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 162.252. ARTICLES OF CONVERSION. (a) The president or

vice president, on behalf of the corporation, shall execute and
acknowledge the approved articles of conversion. The corporation's
seal must be affixed to the articles and attested by its secretary.
(b) The articles of conversion must state:
(1) that they are executed under this chapter;
(2) the name of the corporation and the address of its
principal office before its conversion into a telephone cooperative;
(3) the law under which the corporation was organized;
(4) that the corporation elects to become a cooperative,
nonprofit corporation subject to this chapter;
(5) the corporation's name as a cooperative;
(6) the address of the principal office of the cooperative;
(7) the name and address of each director of the
cooperative;
(8) the manner in which a member, stockholder, or
incorporator of the corporation becomes or may become a member of the
cooperative;
(9) the duration of the cooperative; and
(10) the purpose for which the cooperative is formed.
(c) The articles of conversion may contain any provision
consistent with this chapter considered appropriate for the conduct
of the business of the cooperative. The president or vice president
executing the articles of conversion shall make and attach to the
articles an affidavit stating that the corporation complied with this
section with respect to the articles. The articles of conversion are
considered to be the articles of incorporation of the cooperative.
(d) The original and a copy of the articles of conversion shall
be delivered to the secretary of state. If the secretary of state
finds that the articles conform to law, the secretary of state, on
payment of a fee of $50, shall:
(1) file and record the articles of conversion;
(2) issue a certificate of conversion; and
(3) attach to the certificate of conversion the copy of the

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articles of conversion and deliver the certificate and attached copy

to the cooperative or its representative.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 162.253. CONSOLIDATION AND CONVERSION OF CORPORATIONS INTO

TELEPHONE COOPERATIVE. (a) Two or more corporations organized under
the laws of this state that furnish or are authorized to furnish
communication service may, if otherwise permitted to consolidate
under state law, consolidate and convert into a telephone cooperative
in accordance with this subchapter. On consolidation and conversion,
the new cooperative is subject to this chapter as if it had been
originally organized under this chapter.
(b) The proposition for the consolidation and conversion and
the proposed articles of consolidation and conversion, with any
amendments, must be approved by each corporation in accordance with:
(1) the law under which it was organized; and
(2) Sections 162.251 and 162.252.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 162.254. ARTICLES OF CONSOLIDATION AND CONVERSION. (a)

The approved articles of consolidation and conversion:
(1) shall be executed, acknowledged, and sealed as
prescribed by Section 162.252 and by the law under which the
consolidating and converting corporations were organized;
(2) must:
(A) state that they are executed under this chapter and
the law under which the corporations were organized and that each
consolidating corporation elects that the new corporation be a
cooperative; and
(B) contain all other information required by the law
under which the corporations were organized; and
(3) may contain any provision consistent with this chapter
considered appropriate for the conduct of the business of the
cooperative.
(b) The president or vice president executing the articles of
consolidation and conversion shall make and attach to the articles an
affidavit stating that the corporations complied with this section

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and Section 162.253 and with the applicable provisions of the law
under which the consolidating corporations were organized with
respect to the articles. The articles of consolidation and
conversion are considered to be the articles of incorporation of the
cooperative and shall be filed in accordance with the provisions both
of this chapter and of the law under which the consolidating
corporations were organized.
(c) The original and a copy of the articles of consolidation
and conversion shall be delivered to the secretary of state. If the
secretary of state finds that the articles conform to law, the
secretary of state, on payment of a fee of $50, shall:
(1) file and record the articles of consolidation and
conversion;
(2) issue a certificate of consolidation and conversion;
and
(3) attach to the certificate the copy of the articles and
deliver the certificate and attached copy to the cooperative or its
representative.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER G. DISSOLUTION
Sec. 162.301. DISSOLUTION. (a) A telephone cooperative may be
dissolved by a two-thirds vote of all the members of the cooperative.
The vote must be taken at a regular meeting or at a special meeting
of its members called for that purpose. Votes must be cast in
person.
(b) A certificate of dissolution must be:
(1) signed by the president or vice president and attested
by the secretary, certifying to the dissolution and stating that the
officers have been authorized by a vote of the members under
Subsection (a) to execute and file the certificate; and
(2) executed, acknowledged, filed, and recorded in the same
manner as original articles of incorporation of a telephone
cooperative.
(c) The cooperative is dissolved when the secretary of state
accepts the certificate of dissolution for filing and recording and
issues a certificate of dissolution.
(d) The secretary of state shall charge and collect:

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(1) a fee of $5 for filing a certificate of election to

dissolve; and
(2) a fee of $5 for filing articles of dissolution.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 162.302. EXISTENCE FOLLOWING DISSOLUTION. (a) A

dissolved telephone cooperative continues to exist to:
(1) satisfy existing liabilities or obligations;
(2) collect or liquidate its assets; and
(3) take any other action required to adjust and wind up
its business and affairs.
(b) A dissolved telephone cooperative may sue and be sued in
its corporate name.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 162.303. DISTRIBUTION OF NET ASSETS ON DISSOLUTION.

Assets of a dissolved telephone cooperative that remain after all
liabilities or obligations of the cooperative have been satisfied
shall be distributed as follows:
(1) first, to patrons for the pro rata return of amounts
standing to their credit because of their patronage; and
(2) second, to members for the pro rata repayment of
membership fees.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 162.304. DISSOLUTION OF DEFECTIVELY INCORPORATED TELEPHONE

COOPERATIVE. (a) A telephone cooperative that purports to have been
incorporated or reincorporated under this chapter but that has not
complied with a requirement for legal corporate existence may file a
certificate of dissolution in the same manner as a validly
incorporated telephone cooperative.
(b) The certificate of dissolution may be authorized by a
majority of the incorporators or directors at a meeting called by an
incorporator and held at the principal office of the cooperative
named in the articles of incorporation.

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(c) The incorporator calling the meeting must give at least ten
days' notice of the meeting by mail to the last known post office
address of each incorporator or director.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

CHAPTER 163. JOINT POWERS AGENCIES

SUBCHAPTER A. GENERAL PROVISIONS
Sec. 163.001. DEFINITIONS. In this chapter:
(1) "Electric facility" means a facility necessary or
incidental to generating or transmitting electric power and energy,
including:
(A) a generating unit or plant or a plant site;
(B) transmission lines;
(C) a right-of-way or other right relating to a
facility; and
(D) property and equipment.
(2) "Entity" means a person who engages in the authorized
generation, transmission, or distribution of electric energy for sale
to the public.
(3) "Private entity" means an entity that is not a public
entity.
(4) "Public entity" means an entity that is an agency or
political subdivision of this state.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER B. COOPERATION BY PUBLIC AND PRIVATE ENTITIES

Sec. 163.011. EFFECT OF SUBCHAPTER. This subchapter does not
affect:
(1) the statutory purposes prescribed by state law relating
to creating, establishing, or operating an entity that co-owns a
facility;
(2) an entity's rights or powers in effect on August 27,
1973, relating to the generation, transmission, distribution, or sale
of electric power and energy; or
(3) a contract in effect on August 27, 1973.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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Sec. 163.012. AUTHORITY TO MAKE AGREEMENTS. Public and private

entities may by agreement jointly plan, finance, acquire, construct,
own, operate, and maintain electric facilities to:
(1) achieve economies of scale in providing electric energy
to the public;
(2) promote the economic development of this state and its
natural resources; and
(3) meet the state's future power needs.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 163.013. GENERAL RIGHTS, POWERS, AND DUTIES OF ENTITIES.

(a) A participating entity may:
(1) use its means and assets to plan, acquire, construct,
own, operate, and maintain its interest in an electric facility;
(2) issue bonds and other securities to raise money for a
purpose described by Subdivision (1) in the same manner and to the
same extent and subject to the same conditions as would be applicable
if the entity had sole ownership of the electric facility;
(3) acquire, for the use and benefit of each participating
entity, land, easements, and property for an electric facility by
purchase or by exercising the power of eminent domain; and
(4) transfer or otherwise convey the acquired land,
property, or property interest or otherwise cause the land, property,
or interest to become vested in other participating entities to the
extent to which and in the manner in which the participating entities
agree.
(b) Each participating entity is a cotenant or co-owner of the
electric facility and in relation to the entity's undivided interest
in the facility has each right, privilege, exemption, power, duty,
and liability the entity would have had if the entity had sole
ownership.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 163.014. USE OF EMINENT DOMAIN. (a) A participating

entity has the power of eminent domain to be exercised as provided by

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this section.
(b) The use of eminent domain authority by a participating
entity is governed by the law relating to an eminent domain
proceeding involving a municipality in this state.
(c) A participating entity may acquire a fee title to the
condemned real property.
(d) A participating entity may not use eminent domain authority
to acquire:
(1) an interest in an electric facility that belongs to
another entity; or
(2) an interest in real property to drill, mine, or produce
from that property oil, gas, geothermal resources,
geothermal/geopressured resources, or lignite, coal, sulphur,
uranium, plutonium, or other minerals that belong to another person
regardless of whether the material is in place or is in the process
of being drilled, mined, or produced.
(e) Subsection (d) does not affect the authority of a
participating entity to acquire full title to real property for a
plant site and any related surface installation or equipment,
including a cooling reservoir.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 163.015. TAXATION. (a) A participating private entity

shall render for ad valorem taxation its undivided fractional
interest in a jointly owned electric facility. An ad valorem or
similar tax shall be imposed separately against the undivided
interest of the participating private entity.
(b) A tax or assessment, including an excise tax or sales and
use tax, attributable to a property or service bought, sold, leased,
or used to construct, maintain, repair, or operate a jointly owned
electric facility shall be imposed separately against each
participating entity in proportion to the entity's respective
undivided interest in the facility.
(c) A participating entity is not liable for a tax or
assessment attributable to another participating entity under
Subsection (a) or (b).
(d) A participating entity is entitled to each constitutional
or statutory ad valorem or other tax exemption attributable to the

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jointly owned electric facility or to a property or service bought,

sold, leased, or used to construct, maintain, repair, or operate the
facility to the extent the entity would have been exempt from the tax
if the entity's undivided interest were an entire interest in the
facility or in the property or service. The entity is entitled to
any applicable exemption certificate or statement provided by law to
claim or prove the exemption.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 163.016. INSURANCE. A participating entity may:

(1) contract for insurance, including specialized insurance
for property and risks relating to the ownership, operation, and
maintenance of electric facilities;
(2) contract for insurance for the use and benefit of each
of the other participating entities as though the insurance was for
the sole benefit of the contracting entity; and
(3) cause the rights of the other participating entities to
be protected under the contract in accordance with each entity's
undivided interest or entitlement under any applicable agreement
between the entities.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER C. MUNICIPAL POWER AGENCIES

Sec. 163.051. DEFINITIONS. In this subchapter:
(1) "Agency" means a municipal power agency created under
this subchapter.
(2) "Bond" includes a note, but does not include a
nonnegotiable purchase money note issued under Section 163.067.
(3) "Concurrent ordinance" means an ordinance or order
adopted under this subchapter by two or more public entities that
relates to the creation or re-creation of a municipal power agency.
(4) "Obligations" means revenue bonds or notes.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 163.052. CONSTRUCTION. This subchapter shall be liberally

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construed to carry out its purpose.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 163.053. 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.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 163.054. CREATION OF AGENCY. (a) Public entities may

create an agency by concurrent ordinances subject to voter approval.
(b) A public entity may join in the creation of an agency under
this subchapter only if on May 8, 1975, and at the time the
concurrent ordinance is adopted, the entity was engaged in the
authorized generation of electric energy for sale to the public.
This subsection does not prohibit a public entity from disposing of
its electric generating capabilities after creation of the agency.
(c) An agency is a:
(1) separate municipal corporation;
(2) political subdivision of this state; and
(3) political entity and corporate body.
(d) 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.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 163.055. RE-CREATION OF AGENCY. (a) The public entities

that create an agency may by concurrent ordinances re-create the
agency by adding or deleting, or both, a public entity.
(b) The public entities may not re-create an agency if the re-
creation will impair an agency obligation.
(c) Re-creation by adding a public entity is subject to voter
approval in accordance with Section 163.058.

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Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 163.056. NOTICE. (a) The governing body of each public

entity shall publish notice of its intention to create an agency once
a week for two consecutive weeks.
(b) The first publication must appear before the 14th day
before the date set for passage of the concurrent ordinance.
(c) The notice must state:
(1) the date, time, and location at which the governing
body proposes to enact the concurrent ordinance; and
(2) that an agency will be created on the date on which the
concurrent ordinances take effect.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 163.057. CONTENTS OF CONCURRENT ORDINANCE. A concurrent

ordinance creating an agency under Section 163.054 or re-creating an
agency under Section 163.055 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, initial term, and manner
of appointment of directors in accordance with Section 163.059.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 163.058. ELECTION. (a) An agency may not be created

unless the creation is approved by a majority of the qualified voters
of each public entity creating the agency at an election called and
held for that purpose.
(b) An agency may not be re-created by addition of a public
entity unless the re-creation is approved by a majority of the
qualified voters of the additional public entity at an election
called and held for that purpose.
(c) 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:

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(1) the Election Code;

(2) Chapter 1251, Government Code; and
(3) this subchapter.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 2001, 77th Leg., ch. 1420, Sec. 8.404, eff. Sept. 1, 2001.

Sec. 163.059. BOARD OF DIRECTORS. (a) The agency shall be

governed by a board of directors. The board is responsible for the
management, operation, and control of the property belonging to the
agency.
(b) 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.
(c) Directors must serve staggered terms. Successor directors
are appointed in the same manner as the original appointees.
(d) To qualify to serve as a director, a person must be a
qualified voter and reside in the boundaries of the appointing public
entity when the person takes the constitutional oath of office.
(e) An employee, officer, or member of the governing body of a
public entity may serve as a director but 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.
(f) Directors serve without compensation.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 163.060. POWERS. (a) An agency may not engage in any

utility business other than the generation, transmission, and sale or
exchange of electric energy to:
(1) a participating public entity; or
(2) a private entity that owns jointly with the agency an
electric generating facility in this state.
(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

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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) sell, lease, convey, or otherwise dispose of any right,
interest, or property the agency considers to be unnecessary for the
efficient maintenance or operation of its electric facilities;
(4) use the uniform system of accounts prescribed for
utilities and licenses by the Federal Energy Regulatory Commission;
and
(5) adopt rules to govern the operation of the agency and
its employees, facilities, and service.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 163.061. 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.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 163.062. 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.

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(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.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 163.063. 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 subchapter 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.

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Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 163.064. 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.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 163.065. REFUNDING BONDS. The agency may issue refunding

bonds.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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Sec. 163.066. 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.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 163.067. 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.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 163.068. BOND ANTICIPATION NOTES. (a) The agency may

issue bond anticipation notes:

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(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.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER [Link] 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.

Added by Acts 2015, 84th Leg., R.S., Ch. 1162 (S.B. 776), Sec. 3,
eff. September 1, 2015.

Sec. 163.072. CONSTRUCTION. This subchapter shall be liberally

construed to carry out its purpose.

Added by Acts 2015, 84th Leg., R.S., Ch. 1162 (S.B. 776), Sec. 3,
eff. September 1, 2015.

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

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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.

Added by Acts 2015, 84th Leg., R.S., Ch. 1162 (S.B. 776), Sec. 3,
eff. September 1, 2015.

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.

Added by Acts 2015, 84th Leg., R.S., Ch. 1162 (S.B. 776), Sec. 3,
eff. September 1, 2015.

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.

Added by Acts 2015, 84th Leg., R.S., Ch. 1162 (S.B. 776), Sec. 3,
eff. September 1, 2015.

Sec. 163.076. ADDITION OR REMOVAL OF PUBLIC ENTITIES. (a) The

public entities that created or re-created an agency may by
concurrent ordinances:

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(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.

Added by Acts 2015, 84th Leg., R.S., Ch. 1162 (S.B. 776), Sec. 3,
eff. September 1, 2015.

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.

Added by Acts 2015, 84th Leg., R.S., Ch. 1162 (S.B. 776), Sec. 3,
eff. September 1, 2015.

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

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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

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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.

Added by Acts 2015, 84th Leg., R.S., Ch. 1162 (S.B. 776), Sec. 3,
eff. September 1, 2015.

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.

Added by Acts 2015, 84th Leg., R.S., Ch. 1162 (S.B. 776), Sec. 3,
eff. September 1, 2015.

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

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(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.

Added by Acts 2015, 84th Leg., R.S., Ch. 1162 (S.B. 776), Sec. 3,
eff. September 1, 2015.

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

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contract using the entity's contracting procedures.

Added by Acts 2015, 84th Leg., R.S., Ch. 1162 (S.B. 776), Sec. 3,
eff. September 1, 2015.

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.

Added by Acts 2015, 84th Leg., R.S., Ch. 1162 (S.B. 776), Sec. 3,
eff. September 1, 2015.

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

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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.

Added by Acts 2015, 84th Leg., R.S., Ch. 1162 (S.B. 776), Sec. 3,
eff. September 1, 2015.

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;

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 UTILITIES CODE

(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.

Added by Acts 2015, 84th Leg., R.S., Ch. 1162 (S.B. 776), Sec. 3,
eff. September 1, 2015.

Sec. 163.085. REFUNDING BONDS. The agency may issue refunding

bonds.

Added by Acts 2015, 84th Leg., R.S., Ch. 1162 (S.B. 776), Sec. 3,
eff. September 1, 2015.

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.

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Added by Acts 2015, 84th Leg., R.S., Ch. 1162 (S.B. 776), Sec. 3,
eff. September 1, 2015.

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.

Added by Acts 2015, 84th Leg., R.S., Ch. 1162 (S.B. 776), Sec. 3,
eff. September 1, 2015.

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.

Added by Acts 2015, 84th Leg., R.S., Ch. 1162 (S.B. 776), Sec. 3,
eff. September 1, 2015.

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

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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.

Added by Acts 2015, 84th Leg., R.S., Ch. 1162 (S.B. 776), Sec. 3,
eff. September 1, 2015.

Sec. 163.090. DISSOLUTION. (a) The participating public

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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.

Added by Acts 2015, 84th Leg., R.S., Ch. 1162 (S.B. 776), Sec. 3,
eff. September 1, 2015.

SUBCHAPTER D. AGENCY RECEIVING POWER THROUGH INTERSTATE SYSTEM

Sec. 163.101. CREATION. (a) Notwithstanding Section 163.054,
two or more public entities may create a municipal power agency
governed by Subchapter C if the entities:

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(1) are municipalities;

(2) are engaged in the distribution and sale of electric
energy to the public; and
(3) receive a major portion of their power through or from
an interstate electric system.
(b) The entities must comply with the provisions of Subchapter
C relating to the creation of a municipal power agency, including the
concurrent ordinance and election provisions.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 163.102. POWERS. (a) An agency created under this

subchapter may:
(1) generate and transmit electric power and energy inside
and outside this state;
(2) sell, purchase, or exchange electric power and energy
with entities inside or outside this state; and
(3) construct or acquire new steam electric generating
facilities, but only if the facilities are owned jointly by the
agency and one or more private entities.
(b) This section does not authorize an agency created under
this subchapter to engage in the distribution and retail sale of
electric power and energy.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER E. ELECTRIC COOPERATIVE CORPORATIONS

Sec. 163.121. CREATION. An electric cooperative corporation
may join one or more public entities to create a joint powers agency
as if the corporation were also a public entity.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 163.122. APPLICATION OF OPEN MEETINGS LAW. A joint powers

agency created under this subchapter is a governmental body subject
to Chapter 551, Government Code.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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Sec. 163.123. AUTHORITY OF PUBLIC UTILITY COMMISSION. A joint

powers agency created under this subchapter is:
(1) subject to all applicable provisions of Title 2; and
(2) under the jurisdiction of the Public Utility Commission
of Texas as provided by Title 2.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 163.124. POWER TO ISSUE CERTAIN BONDS OR SECURITIES. This

subchapter does not authorize an electric cooperative corporation to
issue bonds or other securities that are tax exempt under federal
law.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

CHAPTER 164. JOINT OWNERSHIP OF ELECTRIC FACILITIES BY PUBLIC

ENTITIES
Sec. 164.001. JOINT OWNERSHIP OF ELECTRIC UTILITY FACILITIES
AUTHORIZED. (a) Political subdivisions may join together to
finance, construct, complete, acquire, or operate electric utility
facilities so that the facilities or an undivided interest in the
facilities is jointly owned by the political subdivisions as
cotenants or co-owners.
(b) The ownership shares in the facilities are those approved
by the governing bodies of the political subdivisions, as set forth
in an agreement authorized by the governing bodies.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 164.002. PUBLIC PURPOSE. The exercise by a political

subdivision of the authority granted by this chapter, including the
exercise of the power to issue bonds, notes, or other obligations to
accomplish the purposes of this chapter, and the performance of an
agreement entered into under this chapter are considered to be
additional public purposes of the political subdivision, without
regard to any express or implied limitation on the authority or

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purposes of the political subdivision under any other general or

special law or charter provision.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 164.003. APPROVAL OF AGREEMENT BY ATTORNEY GENERAL. (a)

An agreement between political subdivisions establishing an interest
in electric utility facilities that is executed under this chapter
shall be submitted to the attorney general in connection with any
proceeding to finance the contractual obligation by the issuance of
bonds.
(b) An agreement submitted under Subsection (a) is
incontestable on approval as to legality by the attorney general.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 164.004. INCREASE IN OWNERSHIP SHARES. (a) An agreement

under this chapter may provide for a political subdivision to
increase its present or future ownership share of the electric
utility facilities by installment purchase payments and for another
political subdivision that is a party to the agreement to transfer,
in consideration of those payments, any portion of its present or
future ownership share of the facilities to the purchasing political
subdivision.
(b) A payment made by a political subdivision to acquire an
ownership interest is not treated as a maintenance and operating
expense but is treated as a capital cost as if the political
subdivision had issued bonds to construct or acquire the ownership
interest, unless otherwise specified in the agreement.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 164.005. CONTRACTUAL OBLIGATIONS AS LIEN ON SYSTEM

REVENUE. (a) If the electric utility facilities financed, acquired,
constructed, or completed are a part of a utility system of a
political subdivision, the obligation to make the contract payments
to acquire an ownership interest is a lien on the revenue of the
system on a parity with the outstanding bonds of the system to the

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extent permitted in the ordinance or resolution authorizing or the

deed of trust or indenture securing the payment of the outstanding
bonds.
(b) If the ordinance or resolution authorizing or the deed of
trust or trust indenture securing the revenue bonds of a utility
system provides for the subsequent issuance of additional bonds or
the creation of a contractual obligation described by Section 164.004
and provides that the payments to be made for the security or payment
of the subsequent bonds or contractual obligation are to be on a
parity with the previously issued bonds or bonds then to be issued,
the political subdivision may, subject to any conditions contained in
that ordinance, resolution, deed of trust, or trust indenture,
authorize, issue, and sell additional bonds or incur the contractual
obligation in a different series payable from the entire revenue of
the utility system on a parity with the previously issued bonds or
bonds then to be issued and secured by a lien on the revenue of the
system on a parity with the lien securing the previously issued bonds
or bonds then to be issued. This subsection applies without regard
to whether the previously issued bonds:
(1) were issued before August 29, 1977; or
(2) are an original issue or a refunding issue.
(c) A political subdivision may pledge the revenue of a utility
system to pay contract payments to acquire an ownership interest in
an electric utility facility under this chapter.
(d) In this section, "utility system" includes a combined
utility system.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 164.006. CONSTRUCTION WITH OTHER LAWS. To provide full

authority for the execution of an agreement under this chapter, this
chapter applies to a municipality as if this chapter were originally
contained in Chapter 1501 or 1502, Government Code, or Chapter 552,
Local Government Code. This chapter prevails over any charter
provision or general or special law.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 2001, 77th Leg., ch. 1420, Sec. 8.405, eff. Sept. 1, 2001.
Amended by:
Acts 2007, 80th Leg., R.S., Ch. 885 (H.B. 2278), Sec. 3.77(30),

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eff. April 1, 2009.

SUBTITLE B. PROVISIONS REGULATING DELIVERY OF SERVICES

CHAPTER 181. MISCELLANEOUS POWERS AND DUTIES OF UTILITIES
SUBCHAPTER A. POWERS AND DUTIES OF GAS AND ELECTRIC CORPORATIONS
Sec. 181.001. DEFINITIONS. In this chapter:
(1) "Corporation" includes:
(A) a partnership, limited partnership, or master
limited partnership;
(B) a combination of business entities composed
exclusively of corporations or in which a corporation is a general
partner;
(C) a limited liability company; and
(D) a gas utility or electric utility regardless of
form of organization, but not including a municipally owned utility.
(2) "Electric corporation" means an electric current and
power corporation.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 11, Sec. 3, eff. May 3, 1999; Acts
2003, 78th Leg., ch. 559, Sec. 1, eff. June 20, 2003.

Sec. 181.002. CORPORATE POWERS. A gas or electric corporation

has the powers and rights of a corporation organized for profit in
this state whenever those powers and duties may be applicable.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 181.003. AUTHORITY TO BORROW MONEY, ISSUE STOCK, OR

MORTGAGE PROPERTY. A gas or electric corporation has the right to:
(1) borrow money;
(2) issue stock, including preferred stock; or
(3) mortgage a franchise or other property of the
corporation to secure a debt contracted for any purpose of the
corporation.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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Sec. 181.004. CONDEMNATION OF PROPERTY. A gas or electric

corporation has the right and power to enter on, condemn, and
appropriate the land, right-of-way, easement, or other property of
any person or corporation.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 181.005. AUTHORITY TO LAY AND MAINTAIN LINES. (a) A gas

corporation has the right to lay and maintain lines over, along,
under, and across a public road, an interurban railroad, a street
railroad, a canal or stream, or a municipal street or alley and over,
under, and across a railroad or a railroad right-of-way only if:
(1) the pipeline complies with:
(A) all safety regulations adopted by the Railroad
Commission of Texas and all federal regulations relating to pipeline
facilities and pipelines; and
(B) all rules adopted by the Texas Department of
Transportation or the Railroad Commission of Texas and all federal
regulations regarding the accommodation of utility facilities on a
right-of-way, including regulations relating to the horizontal or
vertical placement of the pipeline; and
(2) the owner or operator of the pipeline ensures that the
public right-of-way and any associated facility are promptly restored
to their former condition of usefulness after the installation or
maintenance of the pipeline.
(b) The right granted by Subsection (a) relating to the use of
a municipal street or alley is subject to the payment of charges in
accordance with Section 121.2025 of this code and Sections 182.025
and 182.026, Tax Code.
(c) In determining the route of a pipeline within a
municipality, a gas corporation shall consider using existing
easements and public rights-of-way, including streets, roads,
highways, and utility rights-of-way. In deciding whether to use a
public easement or right-of-way, the gas corporation shall consider
whether:
(1) the use is economically practicable;
(2) adequate space exists; and
(3) the use will violate, or cause the violation of any
pipeline safety regulations.

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(d) The Texas Department of Transportation may require the

owner or operator of a pipeline to relocate the pipeline:
(1) at the expense of the owner or operator of the
pipeline, if the pipeline is located on a right-of-way of the state
highway system;
(2) at the expense of this state, if the pipeline is
located on property in which the owner or operator of the pipeline
has a private interest; or
(3) in accordance with Section 203.092, Transportation
Code, at the expense of this state, if the pipeline is owned or
operated by a gas utility as defined by Section 181.021 of this code
or a common carrier as defined by Chapter 111, Natural Resources
Code.
(e) Rules adopted by the Texas Department of Transportation
regarding horizontal and vertical placement of pipelines must be
reasonable and, for rights-of-way of the state highway system, must
provide an appeals process through the Texas Department of
Transportation.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2009, 81st Leg., R.S., Ch. 1311 (H.B. 2572), Sec. 2, eff.
June 19, 2009.
Acts 2011, 82nd Leg., R.S., Ch. 313 (H.B. 2289), Sec. 1, eff.
June 17, 2011.

Sec. 181.006. CONSENT REQUIRED IN MUNICIPALITY. A gas

corporation may exercise authority under Section 181.005 in relation
to a municipal street or alley with the consent of and subject to the
direction of the governing body of the municipality.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 181.007. AUTHORITY TO HOLD LAND OR OTHER PROPERTY. A gas

or electric corporation has the power to own, hold, or use land, a
right-of-way, an easement, a franchise, or a building or other
structure as necessary for the purpose of the corporation.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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Sec. 181.008. AUTHORITY RELATING TO TRANSPORT OR SALE. (a) A

gas or electric corporation has the power to generate, make,
manufacture, transport, and sell gas, electric current, and power to
an individual, the public, or a municipality for any purpose.
(b) A gas or electric corporation may:
(1) impose reasonable charges for an action taken under
Subsection (a); and
(2) construct, maintain, and operate power plants and
substations and any machinery, apparatus, pipe, pole, wire, device,
or arrangements as necessary to operate its lines in this state.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 181.009. DISCRIMINATION PROHIBITED. A gas or electric

corporation may not discriminate against a person, corporation, firm,
association, or location in:
(1) charging for gas, electric current, or power; or
(2) providing service under similar circumstances.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER B. PROVISIONS APPLYING TO GAS UTILITIES

Sec. 181.021. DEFINITIONS. In this subchapter:
(1) "Gas facility" means a pipe, main, conductor, or other
facility or fixture used to carry gas.
(2) "Gas utility" means a person, firm, corporation, or
municipality engaged in the business of transporting or distributing
gas for public consumption.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 181.022. AUTHORITY TO LAY AND MAINTAIN GAS FACILITY. A

gas utility has the right to lay and maintain a gas facility through,
under, along, across, or over a public highway, a public road, a
public street or alley, or public water.

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Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 181.023. CONSENT REQUIRED IN MUNICIPALITY. A gas utility

may exercise authority under Section 181.022 in a municipality with
the consent of and subject to the direction of the governing body of
the municipality.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 181.024. NOTICE TO STATE OR COUNTY. (a) A gas utility

proposing under this subchapter to locate a gas facility in the
right-of-way of a state highway or a county road not in a
municipality shall give notice of the proposal to:
(1) the Texas Transportation Commission if the proposal
relates to a state highway; or
(2) the commissioners court of the county if the proposal
relates to a county road.
(b) On receipt of the notice, the Texas Transportation
Commission or the commissioners court may designate the location in
the right-of-way where the gas utility may place the gas facility.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 181.025. RELOCATION OF GAS FACILITY TO ALLOW CHANGE TO

TRAFFIC LANE. (a) The authority of the Texas Transportation
Commission under this section is limited to a gas facility on a state
highway not in a municipality. The authority of the commissioners
court under this section is limited to a gas facility on a county
road not in a municipality.
(b) The Texas Transportation Commission or the commissioners
court of a county may require a gas utility to relocate the utility's
gas facility, at the utility's own expense, to allow the widening or
other changing of a traffic lane.
(c) To impose a requirement under this section, the Texas
Transportation Commission or the commissioners court, as appropriate,
must give to the gas utility 30 days' written notice of the
requirement. The notice must identify the gas facility to be
relocated and indicate the location on the new right-of-way where the

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gas utility may place the facility.

(d) The gas utility shall replace the grade and surface of the
highway or road at the utility's own expense.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 181.026. EFFECT OF MUNICIPAL INCORPORATION ON GAS FACILITY

PREVIOUSLY LAID. A gas utility having a gas facility located in an
area that becomes incorporated after the facility is in place may
continue to exercise in that area the authority granted by this
subchapter until the 10th anniversary of the date of the
incorporation without the consent of but subject to the direction of
the governing body of the municipality.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER C. PROVISIONS APPLYING TO ELECTRIC UTILITIES

Sec. 181.041. DEFINITIONS. In this subchapter:
(1) "Electric utility" means:
(A) an electric cooperative organized under Chapter
161;
(B) a corporation or river authority, if the river
authority is created by a statute of this state:
(i) that generates, transmits, or distributes
electric energy in this state; and
(ii) whose operations are subject to the judicial
and legislative processes of this state; or
(C) a municipal electric utility.
(2) "Municipal electric utility" means a municipality in
this state that owns and operates an electric generating plant or
that operates electric transmission lines or an electric distribution
system.
(3) "Distribution line" means a power line operated below
60,000 volts when measured phase to phase.
(4) "Transmission line" means a power line operated at
60,000 volts or more when measured phase to phase.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:

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Acts 2013, 83rd Leg., R.S., Ch. 77 (S.B. 349), Sec. 1, eff. May
18, 2013.

Sec. 181.042. AUTHORITY TO CONSTRUCT, MAINTAIN, AND OPERATE

LINES. An electric utility has the right to construct, maintain, and
operate lines over, under, across, on, or along a state highway, a
county road, a municipal street or alley, or other public property in
a municipality.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 181.043. CONSENT REQUIRED IN MUNICIPALITY. (a) An

electric utility may exercise authority under Section 181.042 in a
municipality with the consent of and subject to the direction of the
governing body of the municipality.
(b) Subsection (a) does not apply to a municipal electric
utility exercising authority under Section 181.042 in its municipal
territory.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 181.044. NOTICE TO STATE OR COUNTY. (a) An electric

utility proposing under this subchapter to construct a line along the
right-of-way of a state highway or a county road not in a
municipality shall give notice of the proposal to:
(1) the Texas Transportation Commission if the proposal
relates to a state highway; or
(2) the commissioners court of the county if the proposal
relates to a county road.
(b) On receipt of the notice, the Texas Transportation
Commission or the commissioners court may designate the location
along the right-of-way where the electric utility may construct the
line.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 181.045. STANDARDS FOR CONSTRUCTION, OPERATION, AND

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MAINTENANCE OF LINES. (a) A municipal electric utility shall

construct, operate, and maintain its transmission lines and
distribution lines along highways and at other places in accordance
with the national electrical safety code. With regard to clearances,
an electric utility that is not a municipal electric utility shall
construct, operate, and maintain its transmission lines and
distribution lines along highways and at other places in accordance
with the national electrical safety code.
(b) Regardless of Subsection (a), an electric utility shall:
(1) use single pole construction for a line along a highway
or county road;
(2) construct a transmission line that crosses a highway or
road so that the line is at least 22 feet above the surface of the
traffic lane; and
(3) construct a line that is above a railroad track or
railroad siding so that the line is at least 22 feet above the
surface of the track or siding.
(c) Subsection (a) does not apply to a line in a municipality
to the extent an ordinance or regulation applying in the municipality
provides differently than the national electrical safety code.
(d) In this section, "national electrical safety code" means
the National Electrical Safety Code, as published in March 1948 by
the National Bureau of Standards, Handbook 30, as revised by Handbook
81, published by the National Bureau of Standards in November 1961.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2013, 83rd Leg., R.S., Ch. 77 (S.B. 349), Sec. 2, eff. May
18, 2013.

Sec. 181.046. RELOCATION OF LINE TO ALLOW ROAD OR DITCH

IMPROVEMENT. (a) The authority of the Texas Transportation
Commission under this section is limited to a line on a state highway
not in a municipality. The authority of the commissioners court
under this section is limited to a line on a county road not in a
municipality.
(b) The Texas Transportation Commission or the commissioners
court of a county may require an electric utility to relocate a line
of the utility, at the utility's own expense, to allow the:

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 UTILITIES CODE

(1) widening of a right-of-way;

(2) changing of a traffic lane;
(3) improving of a road bed; or
(4) improving of a drainage ditch located on a right-of-
way.
(c) To impose a requirement under this section, the Texas
Transportation Commission or the commissioners court, as appropriate,
must give to the electric utility 30 days' written notice of the
requirement. The notice must identify the line to be relocated and
indicate the location on the new right-of-way where the electric
utility may place the line.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 181.047. EFFECT OF MUNICIPAL INCORPORATION ON LINE

PREVIOUSLY CONSTRUCTED. (a) An electric utility that owns a line on
a state highway or county road in a city or town that, at the time of
the construction of the line, is unincorporated but that later
incorporates as a municipality may continue to exercise in the
municipality the authority granted by Section 181.042 until the 10th
anniversary of the date of the incorporation.
(b) After that period, to continue to exercise the authority in
the municipality the electric utility must have the consent of the
governing body of the municipality.
(c) The governing body of the municipality may require the
electric utility to relocate a pole or line, at the utility's own
expense, to allow the widening or straightening of a street. To
impose a requirement under this subsection, the governing body of the
municipality must give to the electric utility 30 days' notice. The
notice must indicate the new location for the pole or line along the
right-of-way of the street.
(d) This section does not prohibit a municipality from imposing
a tax or special charge for the use of a street as authorized by
Subchapter B, Chapter 182, Tax Code.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 181.048. ELECTRIC COOPERATIVE BROADBAND FACILITIES. (a)

In this section:

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(1) "Broadband service" means Internet service with the

capability of providing:
(A) a download speed of 25 megabits per second or
faster; and
(B) an upload speed of three megabits per second or
faster.
(2) "Electric cooperative" means an electric cooperative
organized under Chapter 161 or a predecessor statute to Chapter 161.
(b) An electric cooperative or electric cooperative affiliate
may construct, operate, and maintain fiber optic cables and other
facilities for providing broadband service over, under, across, on,
or along real property, personal property, rights-of-way, easements,
and licenses and other property rights owned, held, or used by the
cooperative. An easement or other property right owned, held, or
used by the electric cooperative to provide electricity or other
services may also be used to provide broadband service.
(c) The monetary rates applicable to an electric cooperative or
electric cooperative affiliate for attaching broadband facilities on
the electric cooperative's poles must be just and reasonable and may
not be less than the monetary rates the electric cooperative charges
to other broadband service providers for attaching broadband
facilities to the electric cooperative's poles. The terms and
conditions applicable to an electric cooperative or electric
cooperative affiliate for attaching broadband facilities on the
electric cooperative's poles must be just and reasonable and be
comparable to the terms and conditions the electric cooperative
applies to other broadband service providers for attaching broadband
facilities to the electric cooperative's poles. This subsection does
not limit or restrict an electric cooperative or electric cooperative
affiliate from installing fiber optic cables in the supply space of
the electric cooperative's poles.
(d) An electric cooperative or electric cooperative affiliate
that provides broadband service shall maintain separate books and
records of broadband service operations and the broadband service
operations of any subsidiary and shall ensure that the rates charged
for provision of electric service do not include any broadband
service costs or any other costs not related to the provision of
electric service.
(e) Subject to Subsection (f), not later than the 60th day
before the date the electric cooperative or electric cooperative

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affiliate begins construction in an easement or other property right

that existed before that date of fiber optic cables and other
facilities for providing broadband service, the electric cooperative
or electric cooperative affiliate must provide written notice to the
owners of property in which the easement or property right is located
of the intent to use the easement or other property right for
broadband service. The electric cooperative or electric cooperative
affiliate shall send the notice by first class mail to the last known
address of each person in whose name the property is listed on the
most recent tax roll of each county authorized to levy property taxes
against the property. The notice must state whether any new fiber
optic cables used for broadband service will be located above or
below ground in the easement or other property right. Not later than
the 60th day after the date notice is mailed by the electric
cooperative or electric cooperative affiliate, a property owner
entitled to notice under this subsection may submit to the electric
cooperative or electric cooperative affiliate a written protest of
the intended use of the easement or other property right for
broadband service. If an electric cooperative or electric
cooperative affiliate receives a timely written protest under this
subsection, the electric cooperative or electric cooperative
affiliate may not use the easement or other property right for
broadband service unless the protestor later agrees in writing to
that use or that use is authorized by law.
(f) Subsection (e) does not apply to an electric cooperative's
or electric cooperative affiliate's use of an easement or other
property right that includes an authorization for the use of the
easement or property right for the provision of broadband service or
similar communications service.
(g) This section may not be construed to:
(1) conflict with or limit the provisions of Chapter 43; or
(2) limit or prohibit an electric cooperative's use of the
electric cooperative's fiber optic cables or other facilities to
operate and maintain the electric cooperative's electric transmission
or distribution system or to provide electric service.

Added by Acts 2019, 86th Leg., R.S., Ch. 499 (S.B. 14), Sec. 1, eff.
June 7, 2019.

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SUBCHAPTER D. PROVISIONS APPLYING TO TELEGRAPH COMPANIES

Sec. 181.061. DEFINITION. In this subchapter, "telegraph
company" includes a person, firm, corporation, or association engaged
in the business of accepting and transmitting messages to and from
different locations in this state through use of a telegraph.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 181.062. TELEGRAPH CONNECTIONS. A telegraph company

engaged in business at the same location or in the same municipality
as another telegraph company shall provide:
(1) means through which a message may be transferred to the
lines of the other telegraph company at common locations and
transmitted to the message's final destination; and
(2) facilities to assure the transfer of a message in
compliance with this section.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 181.063. EXCEPTIONS. (a) A telegraph company is not

required to transfer a message to another line if:
(1) the message originated on the company's line; and
(2) the company can deliver the message directly to its
intended recipient on the company's lines.
(b) A telegraph company is not required to receive a message
from another's line and transmit the message to its final destination
if the message originated at a location on the company's lines.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 181.064. HEARING AND DETERMINATION. (a) The governing

body of a municipality or, for an unincorporated area, the
commissioners court of the county, shall on its own motion or on
application of at least 100 residents:
(1) hear evidence as the governing body or commissioners
court considers necessary; and
(2) determine whether a connection between different lines
or other arrangements for transfer of messages is:

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(A) necessary for public convenience; and

(B) just to the telegraph companies.
(b) After conducting a hearing and making the determinations
required by Subsection (a), the governing body or commissioners court
shall issue an order that:
(1) includes the findings of the governing body or
commissioners court;
(2) specifies the conditions under which the arrangements
for transfer of messages will be made; and
(3) specifies the proportion of expense to be paid by the
owner or operator of each line.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 181.065. PENALTY. (a) A telegraph company shall comply

with an order of a municipality's governing body or a commissioners
court requiring the company to arrange for transfer of messages.
(b) A telegraph company that fails to comply with an order is
subject to a penalty of $10 for each day of noncompliance, payable to
the state. The county or district attorney may bring suit to recover
the penalty.
(c) A penalty may not be imposed against a telegraph company
for noncompliance with an order if:
(1) the company is prevented from making a connection
through the fault or omission of another company; and
(2) the fault or omission causes the company's failure to
connect.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 181.066. APPEAL. (a) A telegraph company ordered to

transfer messages under this subchapter has the right to appeal to
the court having jurisdiction over the matter.
(b) If the court finds that the telegraph company had
reasonable grounds for bringing the appeal, the court shall suspend
any penalty imposed under this subchapter until the appeal is finally
determined.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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SUBCHAPTER E. PROVISIONS APPLYING TO TELEPHONE AND TELEGRAPH

CORPORATIONS
Sec. 181.081. DEFINITIONS. In this subchapter:
(1) "Facility" means a pole, pier, abutment, wire, or other
fixture related to a telephone or magnetic telegraph line.
(2) "Telegraph corporation" means a corporation created to
construct and maintain magnetic telegraph lines.
(3) "Telephone corporation" means a corporation created to
construct and maintain telephone lines.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 181.082. AUTHORITY TO INSTALL FACILITY IN RELATION TO

PUBLIC PROPERTY. A telephone or telegraph corporation may install a
facility of the corporation along, on, or across a public road, a
public street, or public water in a manner that does not
inconvenience the public in the use of the road, street, or water.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 181.083. AUTHORITY TO CONSTRUCT LINE ON PRIVATE PROPERTY.

A telephone or telegraph corporation may enter land in which a
private person or a corporation owns a fee or lesser estate to:
(1) make a preliminary survey or examination to prepare for
the construction of a telephone or telegraph line;
(2) change the location of a part of a telephone or
telegraph line as necessary; or
(3) construct or repair a telephone or telegraph line.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 181.084. APPROPRIATION OR CONDEMNATION OF LAND. A

telephone or telegraph corporation has the right to:
(1) appropriate as much land owned by a private person or a
corporation as is necessary to construct a facility; or
(2) condemn land to acquire a right-of-way or other

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interest in the land for the use of the telephone or telegraph

corporation.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 181.085. PROHIBITION ON LAND CONTRACT EXCLUDING ANOTHER

TELEGRAPH UTILITY. A telegraph corporation may not contract with an
owner of land for the right to construct and maintain a telegraph
line over the land to the exclusion of the line of another telegraph
corporation.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 181.086. LINES IN OR OUTSIDE STATE. A telegraph

corporation may construct, own, use, or maintain a telegraph line in
or outside this state.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 181.087. USE OF ANOTHER'S TELEGRAPH LINE. (a) A

telegraph corporation may:
(1) lease the telegraph line of another telegraph
corporation;
(2) as the result of a lease or purchase, attach to its
telegraph line the telegraph line of another telegraph corporation;
or
(3) join with any other corporation or association to
construct, lease, own, use, or maintain a telegraph line.
(b) An action under Subsection (a)(3) must be taken in
accordance with an agreement made by the directors or managers of the
telegraph corporations.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 181.088. CONSOLIDATION OF UTILITIES. (a) A telephone or

telegraph corporation organized under the law of this state may
consolidate or otherwise unite with one or more other companies

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organized under the law of a state or the United States if the union
or consolidation:
(1) is approved, at a regular meeting of the corporation's
stockholders, by a vote of persons holding a majority of the shares
of stock of the corporation; and
(2) is done with the consent of each other company.
(b) The company resulting from the consolidation or other union
may hold, use, and enjoy the rights and privileges given by the law
of this state to, and has the same liabilities of, a company
separately organized under the law of this state relating to
corporations.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 181.089. MUNICIPAL REGULATION. (a) The appropriate

authorities of a municipality through which a line of a telephone or
telegraph corporation is to pass may adopt, by ordinance or another
method, regulations governing the corporation that specify the:
(1) location of the facilities of the corporation;
(2) kind of posts that must be used by the corporation; or
(3) height at which the wires of the corporation must be
placed.
(b) After the construction of the telephone or telegraph line,
the appropriate authorities of the municipality, after giving the
corporation or its agents an opportunity to be heard, may direct any
change in:
(1) the construction or location of the facilities; or
(2) the height at which the corporation must locate the
wires.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER F. PROVISIONS APPLYING TO COMMUNITY ANTENNA AND CABLE

TELEVISION UTILITIES
Sec. 181.101. DEFINITIONS. In this subchapter:
(1) "Equipment" means a line, wire, cable, pipe, conduit,
conductor, pole, or other facility for the transmission of community
antenna or cable television service.
(2) "Person" means an individual, firm, or corporation.

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Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 181.102. AUTHORITY TO INSTALL AND MAINTAIN EQUIPMENT. (a)

In an unincorporated area, a person in the business of providing
community antenna or cable television service to the public may
install and maintain equipment through, under, along, across, or over
a utility easement, a public road, an alley, or a body of public
water in accordance with this subchapter.
(b) The installation and maintenance of the equipment must be
done in a way that does not unduly inconvenience the public using the
affected property.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 181.103. NOTICE TO STATE OR COUNTY. (a) A person

proposing to install equipment under Section 181.102 in the right-of-
way of a state highway or a county road shall give notice of the
proposal to:
(1) the Texas Department of Transportation if the proposal
relates to a state highway; or
(2) the commissioners court of the county if the proposal
relates to a county road.
(b) On receipt of the notice, the Texas Department of
Transportation or commissioners court may designate the location in
the right-of-way where the person may install the equipment, if the
equipment is not to be installed on an existing facility.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 181.104. RELOCATION OF EQUIPMENT TO ALLOW CHANGE TO

TRAFFIC LANE. (a) The authority of the Texas Department of
Transportation under this section is limited to equipment installed
in connection with a state highway. The authority of the
commissioners court under this section is limited to equipment
installed in connection with a county road.
(b) The Texas Department of Transportation or the commissioners
court of a county may require a person who has installed equipment in
the right-of-way of a state highway or county road to relocate the

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person's equipment to allow the widening or other changing of a

traffic lane.
(c) To impose a requirement under this section, the Texas
Department of Transportation or the commissioners court, as
appropriate, must give to the person written notice of the
requirement not later than the 45th day before the date the
relocation is to be made. The notice must identify the equipment to
be relocated and indicate the location in the right-of-way where the
person may reinstall the equipment.
(d) The person shall pay the cost of repairing a state highway
or county road damaged by the relocation.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER Z. MISCELLANEOUS PROVISIONS

Sec. 181.901. AUTHORITY OF GENERAL-LAW MUNICIPALITY TO PROTECT
UTILITY. (a) The governing body of a general-law municipality may
adopt an ordinance that applies to a utility using the streets and
public grounds of the municipality and that protects the utility:
(1) in the free enjoyment of the utility's rights and
privileges; and
(2) from interference with the utility's property and
franchises.
(b) In this section, "utility" means a person, company, or
corporation engaged in furnishing water, gas, telephone, light,
power, or sewage service to the public.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 181.902. AUTHORITY OF GENERAL-LAW MUNICIPALITY TO PREVENT

USE OR WASTE OF UTILITY COMMODITY OR SERVICE. (a) The governing
body of a general-law municipality may adopt an ordinance that
prevents the free or unauthorized use or the waste of a commodity or
service furnished by a utility that uses the streets and public
grounds of the municipality.
(b) In this section, "utility" has the meaning assigned to the
term by Section 181.901.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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Sec. 181.903. RESTRICTION ON REGULATION OF UTILITY SERVICES AND

INFRASTRUCTURE. (a) In this section:
(1) "Regulatory authority" has the meanings assigned by
Sections 11.003 and 101.003.
(2) "Utility" has the meaning assigned by Section 181.901,
except that the term does not include a person, company, or
corporation engaged in furnishing telephone service to the public.
(b) No regulatory authority, planning authority, or political
subdivision of this state may adopt or enforce an ordinance,
resolution, regulation, code, order, policy, or other measure that
has the purpose, intent, or effect of directly or indirectly banning,
limiting, restricting, discriminating against, or prohibiting the
connection or reconnection of a utility service or the construction,
maintenance, or installation of residential, commercial, or other
public or private infrastructure for a utility service based on the
type or source of energy to be delivered to the end-use customer.
(c) An entity, including a regulatory authority, planning
authority, political subdivision, or utility, may not impose any
additional charge or pricing difference on a development or building
permit applicant for utility infrastructure that:
(1) encourages those constructing homes, buildings, or
other structural improvements to connect to a utility service based
on the type or source of energy to be delivered to the end-use
customer; or
(2) discourages the installation of facilities for the
delivery of or use of a utility service based on the type or source
of energy to be delivered to the end-use customer.
(d) This section does not limit the ability of a regulatory
authority or political subdivision to choose utility services for
properties owned by the regulatory authority or political
subdivision.

Added by Acts 2021, 87th Leg., R.S., Ch. 44 (H.B. 17), Sec. 1, eff.
May 18, 2021.

CHAPTER 182. RIGHTS OF UTILITY CUSTOMERS

SUBCHAPTER A. PAYMENT DATE OF UTILITY BILL FOR ELDERLY INDIVIDUAL

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Sec. 182.001. DEFINITIONS. In this subchapter:

(1) "Elderly individual" means an individual who is 60
years of age or older.
(2) "Utility" means an electric, gas, water, or telephone
utility operated by a public or private entity.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 182.002. DELAY OF BILL PAYMENT DATE FOR ELDERLY

INDIVIDUAL. (a) On request by an elderly individual, a utility
shall delay without penalty the payment date of a bill for providing
utility service to that individual until the 25th day after the date
the bill is issued.
(b) This subchapter applies only to an elderly individual who:
(1) is a residential customer; and
(2) occupies the entire premises for which a delay is
requested.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 182.003. REQUEST FOR DELAY. An elderly individual may

request that the utility implement the delay under Section 182.002
for:
(1) the most recent utility bill; or
(2) the most recent utility bill and each subsequent
utility bill.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 182.004. PROOF OF AGE. A utility may require an

individual requesting a delay under this subchapter to present
reasonable proof that the individual is 60 years of age or older.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 182.005. CERTAIN UTILITIES NOT AFFECTED. This subchapter

does not apply to a utility that:

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(1) does not assess a late payment charge on a residential

customer;
(2) does not suspend service before the 26th day after the
date of the bill for which collection action is taken; and
(3) is regulated under Title 2.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER B. DISCLOSURE OF CUSTOMER INFORMATION

Sec. 182.051. DEFINITIONS. In this subchapter:
(1) "Consumer reporting agency" means a person who, for a
monetary fee or payment of dues, or on a cooperative nonprofit basis,
regularly engages in the practice of assembling or evaluating
consumer credit information or other information relating to
consumers in order to furnish a consumer report to a third party.
(2) "Governmental body" has the meaning assigned by Section
552.003, Government Code.
(3) "Government-operated utility" means a governmental body
or an entity governed by a governmental body that, for compensation,
provides water, wastewater, sewer, gas, garbage, electricity, or
drainage service.
(4) "Personal information" means an individual's address,
telephone number, or social security number.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 182.052. DISCLOSURE OF PERSONAL INFORMATION. (a) Except

as provided by Section 182.054, a government-operated utility may not
disclose personal information in a customer's account record, or any
information relating to the volume or units of utility usage or the
amounts billed to or collected from the individual for utility usage,
unless the customer requests that the government-operated utility
disclose the information.
(b) A customer may request disclosure of information described
by Subsection (a) by delivering to the government-operated utility an
appropriately marked form provided under Subsection (c)(2) or any
other written request for disclosure.
(c) A government-operated utility shall include with a bill
sent to each customer or shall post on the utility's Internet

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website:
(1) a notice of the customer's right to request disclosure
under this section; and
(2) a form by which the customer may request disclosure by
marking an appropriate box on the form and returning it to the
government-operated utility, either by mail or electronically.
(d) A customer may rescind a request for disclosure under this
section by providing the government-operated utility a written
request to withhold the customer's personal information beginning on
the date the utility receives the request.
(e) A governmental body as defined by Section 552.003,
Government Code, may withhold information prohibited from being
disclosed under this section without the necessity of requesting a
decision from the attorney general under Subchapter G, Chapter 552,
Government Code.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended
by Acts 2001, 77th Leg., ch. 966, Sec. 2.59, eff. Sept. 1, 2001.
Amended by:
Acts 2015, 84th Leg., R.S., Ch. 692 (H.B. 685), Sec. 2, eff.
September 1, 2015.
Acts 2021, 87th Leg., R.S., Ch. 1025 (H.B. 872), Sec. 3, eff.
June 18, 2021.
Acts 2021, 87th Leg., R.S., Ch. 1025 (H.B. 872), Sec. 4, eff.
June 18, 2021.

Sec. 182.054. EXCEPTIONS. This subchapter does not prohibit a

government-operated utility from disclosing personal information in a
customer's account record to:
(1) an official or employee of the state, a political
subdivision of the state, or the United States acting in an official
capacity;
(2) an employee of a utility acting in connection with the
employee's duties;
(3) a consumer reporting agency;
(4) a contractor or subcontractor approved by and providing
services to the utility, the state, a political subdivision of the
state, or the United States;
(5) a person for whom the customer has contractually waived

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confidentiality for personal information;

(6) another entity that provides water, wastewater, sewer,
gas, garbage, electricity, or drainage service for compensation;
(7) another entity as necessary to facilitate the
transition of customers among retail electric providers under Section
40.053 or to comply with rules, guidelines, and procedures
established by an independent organization certified under Section
39.151; or
(8) a retail electric provider, as defined by Section
31.002(17).

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2023, 88th Leg., R.S., Ch. 46 (H.B. 2664), Sec. 1, eff. May
19, 2023.

Sec. 182.055. NO CIVIL LIABILITY FROM VIOLATION. A government-

operated utility or an officer or employee of a government-operated
utility is immune from civil liability for a violation of this
subchapter.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER C. TESTING OF METERS

Sec. 182.101. DEFINITIONS. In this subchapter:
(1) "Consumer" means a person who obtains electricity or
gas from a utility.
(2) "Gas" includes natural gas and artificial gas.
(3) "Meter" means an instrument or machine used to measure
and record the use of electricity or gas.
(4) "Test" includes, in reference to the testing of a meter
and as necessary to the reading and examination of a meter, the
authority to break the seal.
(5) "Utility" means a person, other than a governmental
entity, who provides for compensation electricity or gas for
consumption in a municipality.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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Sec. 182.102. TESTING OF METER. (a) On complaint by a

consumer to the governing body of a municipality, an agent or
employee of the municipality shall examine, read, and test a meter
that is installed by the utility furnishing the electricity or gas.
(b) On demand by a consumer to the governing body of a
municipality, the governing body shall provide the consumer with a
detailed report stating the results of the examination, reading, and
test, including:
(1) whether the meter is in good condition;
(2) whether the meter functions properly; and
(3) the amount of electricity or gas used during a period
designated by the consumer in the demand, not to exceed one year.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 182.103. UTILITY REPRESENTATIVE; NOTICE. A utility

representative may be present during a meter test. The municipality
shall provide notice to a utility regarding the testing of a meter
not later than the third day before the date the meter test is
conducted.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 182.104. OFFENSE. (a) A utility or other person commits

an offense if the utility or other person fails or refuses to allow
an agent or employee of a municipality to examine a meter.
(b) An offense under this section is a misdemeanor punishable
by a fine not to exceed $200.
(c) Each day a utility or other person refuses to allow an
agent or employee of a municipality to examine a meter is a separate
offense.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER D. BILL PAYMENT ASSISTANCE PROGRAM FOR BURNED VETERANS

Sec. 182.201. DEFINITIONS. In this subchapter, "electric
cooperative" and "municipally owned utility" have the meanings
assigned by Section 11.003.

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Added by Acts 2013, 83rd Leg., R.S., Ch. 597 (S.B. 981), Sec. 3, eff.
June 14, 2013.

Sec. 182.202. BURNED VETERANS ASSISTANCE PROGRAM. (a) The

board of directors of an electric cooperative or the governing body
of a municipally owned utility may establish a bill payment
assistance program for a customer who is a military veteran who a
medical doctor certifies has a significantly decreased ability to
regulate the individual's body temperature because of severe burns
received in combat.
(b) The costs of a bill payment assistance program established
under Subsection (a) are considered a necessary operations expense.
(c) The board of directors of an electric cooperative or the
governing body of a municipally owned utility may determine the
method to fund a bill payment assistance program established under
Subsection (a).

Added by Acts 2013, 83rd Leg., R.S., Ch. 597 (S.B. 981), Sec. 3, eff.
June 14, 2013.

CHAPTER 183. UTILITY DEPOSITS

Sec. 183.001. DEFINITIONS. In this chapter:
(1) "Commission" means the Public Utility Commission of
Texas.
(2) "Utility" means a person, firm, company, corporation,
receiver, or trustee who furnishes water, electric, gas, or telephone
service.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 183.002. INTEREST ON DEPOSIT. A utility that requires the

user of a service to pay a money deposit as a condition to furnishing
the service shall pay interest on the deposit from the time the
deposit is made.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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Sec. 183.003. RATE OF INTEREST. The commission on or before

each December 1 shall set the annual interest rate for the next
calendar year on deposits governed by this chapter at the average
rate paid over the previous 12-month period on United States treasury
bills with a 26-week maturity.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2005, 79th Leg., Ch. 1320 (H.B. 3460), Sec. 1, eff.
September 1, 2005.
Acts 2015, 84th Leg., R.S., Ch. 372 (S.B. 734), Sec. 1, eff.
September 1, 2015.

Sec. 183.004. INTEREST PAYMENT TO DEPOSITOR. A utility shall

pay interest on the deposit to the depositor or the depositor's heirs
or assigns annually on demand or sooner if the service is
discontinued.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 183.005. RETURN OF DEPOSIT. (a) When the service is

discontinued, the utility shall return the deposit and any unpaid
interest on the deposit to the depositor or the depositor's heirs or
legal representatives.
(b) The utility company may deduct from the amount returned
under Subsection (a) any payments due for the services.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 183.006. CRIMINAL PENALTY. (a) A person commits an

offense if the person violates this chapter.
(b) An offense under this section is punishable by:
(1) a fine of not less than $25 and not more than $200;
(2) confinement in jail for not less than six months and
not more than one year; or
(3) both the fine and confinement.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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CHAPTER 184. ELECTRIC AND WATER METERING

SUBCHAPTER A. GENERAL PROVISIONS
Sec. 184.001. DEFINITION. In this chapter, "commission" means
the Public Utility Commission of Texas.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER B. METERING IN APARTMENTS, CONDOMINIUMS, AND MOBILE HOME

PARKS
Sec. 184.011. DEFINITIONS. In this subchapter:
(1) "Apartment house" means one or more buildings
containing more than five dwelling units each of which is rented
primarily for nontransient use with rent paid at intervals of one
week or longer. The term includes a rented or owner-occupied
residential condominium.
(2) "Dwelling unit":
(A) means:
(i) one or more rooms that are suitable for
occupancy as a residence and that contain kitchen and bathroom
facilities; or
(ii) a mobile home in a mobile home park; and
(B) does not include a recreational vehicle, as defined
by Section 522.004(b), Transportation Code.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2013, 83rd Leg., R.S., Ch. 613 (S.B. 1268), Sec. 4, eff.
September 1, 2013.

Sec. 184.012. NEW CONSTRUCTION OR CONVERSION. (a) A political

subdivision may not authorize the construction or occupancy of a new
apartment house, including the conversion of property to a
condominium, unless the construction plan provides for the
measurement of the quantity of electricity consumed by the occupants
of each dwelling unit of the apartment house, either by individual
metering by the utility company or by submetering by the owner.
(b) This section does not prohibit a political subdivision from

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issuing a permit to a nonprofit organization for construction of a

new apartment house for occupancy by low-income elderly tenants if
the nonprofit organization establishes, by submitting engineering and
cost data and a sworn statement, that all cost savings will be passed
on to the low-income elderly tenants.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 184.0125. HOUSING FOR OLDER PERSONS. (a) Section 184.012

does not prohibit a political subdivision from issuing a permit for
the construction of housing for older persons with 100 or more
dwelling units.
(b) Before issuing a permit, certificate, or other
authorization for the construction of housing for older persons, a
political subdivision shall require that the construction plan
provide for the requirements prescribed by this section.
(c) To qualify for the exemption provided by this section, the
housing, at a minimum, must have:
(1) significant facilities and services specifically
designed to meet the physical or social needs of older persons or, if
the provision of those facilities and services is not practicable,
the housing must be necessary to provide important housing
opportunities for older persons;
(2) at least 80 percent of the dwelling units set aside for
occupancy by at least one person 55 years of age or older in each
dwelling unit; and
(3) policies and procedures that demonstrate an intent by
the owner or manager to provide housing for persons 55 years of age
or older.
(d) The owner or manager must adhere to the policies and
procedures required by Subsection (c)(3).
(e) In this section, "housing for older persons" means housing:
(1) intended for and solely occupied by persons 62 years of
age or older; or
(2) intended and operated for occupancy by at least one
person 55 years of age or older in each dwelling unit.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 18.16(a), eff. Sept. 1,
1999.

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Sec. 184.013. SUBMETERING. (a) The owner of an apartment

house or mobile home park may submeter each dwelling unit in the
apartment house or mobile home park to measure the quantity of
electricity consumed by the occupants of the dwelling unit.
(b) Electric submetering equipment is subject to:
(1) the same rules adopted by the commission for accuracy,
testing, and recordkeeping of meters installed by electric utilities;
and
(2) the meter testing requirements of Subchapter C, Chapter
38.
(c) If not more than 90 days before the date an owner,
operator, or manager of an apartment house installs individual meters
or submeters in the apartment house the owner, operator, or manager
increases rental rates and the increase in rental rates is
attributable to the increased cost of utilities, the owner, operator,
or manager, on installation of the meters or submeters, shall:
(1) immediately reduce the rental rate by the amount of the
increase attributable to the increased cost of utilities; and
(2) refund the amount of the increased rent:
(A) collected in the 90-day period preceding the
installation of the meters or submeters; and
(B) attributable to the cost of increased utilities.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 184.014. RULES. (a) The commission shall adopt rules

under which an owner, operator, or manager of an apartment house or
mobile home park for which electricity is not individually metered
may install submetering equipment to allocate fairly the cost of the
electrical consumption of each dwelling unit in the apartment house
or mobile home park.
(b) In addition to other appropriate safeguards for a tenant of
an apartment house or mobile home park, a rule adopted under
Subsection (a) must provide that:
(1) the apartment house owner or a mobile home park owner
may not charge a tenant more than the cost per kilowatt hour charged
by the utility to the owner; and
(2) the apartment house owner shall maintain adequate
records relating to submetering and make those records available for

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inspection by the tenant during reasonable business hours.

(c) A rule adopted under this section has the same effect as a
rule adopted under Title 2, and a utility company and the owner,
operator, or manager of an apartment house subject to this subchapter
is subject to enforcement under Sections 15.021, 15.022, 15.028,
15.029, 15.030, 15.031, 15.032, and 15.033.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER C. METERING IN RECREATIONAL VEHICLE PARKS

Sec. 184.031. DEFINITIONS. In this subchapter:
(1) "Recreational vehicle" has the meaning assigned by
Section 522.004(b), Transportation Code.
(2) "Supplying utility" means the electric utility from
which a recreational vehicle park owner purchases electricity
consumed at the recreational vehicle park.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 184.032. METERED SALE UNDER COMMISSION RULES. The metered

sale of electricity by a recreational vehicle park owner in
compliance with submetering rules adopted by the commission under
Title 2 does not constitute the provision of electric service for
compensation.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 184.033. METERED SALE UNDER THIS CHAPTER. Notwithstanding

any provision of Title 2, the metered sale of electricity by a
recreational vehicle park owner does not constitute the provision of
electric service for compensation if:
(1) the electricity is consumed in a recreational vehicle
that is located in a recreational vehicle park;
(2) the owner can show that the owner does not annually
recover from recreational vehicle occupants through metered charges
more than the supplying utility charges the owner for electricity
that is submetered, taking into account fuel refunds;
(3) the owner establishes a fiscal year for the purposes of

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this subchapter and maintains for at least three years records of:
(A) bills received from the supplying utility;
(B) charges made to recreational vehicle occupants;
and
(C) consumption records for each fiscal year;
(4) the owner charges for electricity using a fixed rate
per kilowatt hour for each fiscal year computed at the beginning of
the fiscal year in the manner provided by Section 184.034; and
(5) the owner complies with the refund requirements of
Section 184.035.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 184.034. COMPUTATION OF CHARGES. (a) For the purposes of

computing the charge for electricity under Section 184.033(4), the
recreational vehicle park owner shall divide the amount charged the
owner by the supplying utility for the preceding fiscal year by the
total number of kilowatt hours consumed by occupants visiting the
park in the preceding fiscal year and round the quotient to the
nearest cent.
(b) If since or during the preceding fiscal year the supplying
utility increases its rates, the owner may recompute the preceding
fiscal year's charges by the utility using the current rates charged
by the utility.
(c) If since or during the preceding fiscal year the supplying
utility decreases its rates, the owner shall recompute the preceding
fiscal year's charges by the utility using the current rates charged
by the utility.
(d) An owner may not:
(1) include a charge by the supplying utility for
electricity used in a common area or office of the recreational
vehicle park in computing the amounts under Subsection (b) or (c);
or
(2) recover that charge through a metered charge to a
recreational vehicle occupant.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 184.035. REFUND OF SURCHARGES. A recreational vehicle

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park owner who determines at the end of a fiscal year that the owner
has collected more than the amount charged by the supplying utility
shall refund the excess amount to occupants visiting the park in the
succeeding fiscal year.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 184.036. UTILITY CUTOFF AT RECREATIONAL VEHICLE PARK.

Notwithstanding any other law, a person who operates a recreational
vehicle park, as defined by Section 13.087, Water Code, may withhold
electric, water, or wastewater utility services from a person
occupying a recreational vehicle at the park if the occupant is
delinquent in paying for utility services provided by the operator
until the occupant pays the delinquent amount.

Added by Acts 2013, 83rd Leg., R.S., Ch. 613 (S.B. 1268), Sec. 5, eff.
September 1, 2013.

SUBCHAPTER D. CENTRAL SYSTEM UTILITIES

Sec. 184.051. DEFINITIONS. In this subchapter:
(1) "Apartment house" means one or more buildings
containing two or more dwelling units rented primarily for
nontransient use with rent paid at intervals of one week or longer.
(2) "Apartment house owner" means the legal titleholder of
an apartment house or an individual, firm, or corporation purporting
to be the landlord of tenants in the apartment house.
(3) "Central system utilities" means electricity and water
consumed by and wastewater services related to a central air
conditioning system, central heating system, central hot water
system, or central chilled water system in an apartment house. The
term does not include utilities directly consumed in a dwelling unit.
(4) "Customer" means an individual, firm, or corporation in
whose name a master meter is connected by a utility.
(5) "Dwelling unit" means one or more rooms that are
suitable for occupancy as a residence and that contain kitchen and
bathroom facilities.
(6) "Nonsubmetered master metered utility service" means an
electric utility service that is master metered for an apartment
house but is not submetered.

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(7) "Tenant" means a person who is entitled to occupy a

dwelling unit in an apartment house to the exclusion of others and
who is obligated to pay for the occupancy under a written or oral
rental agreement.
(8) "Utility" means a public, private, or member-owned
utility that provides electricity, water, or wastewater service to an
apartment house served by a master meter.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 184.052. RULES. (a) The commission shall adopt rules

governing billing systems or methods used by an apartment house owner
to prorate or allocate among tenants central system utility costs or
nonsubmetered master metered utility service costs.
(b) In addition to other appropriate safeguards for a tenant of
an apartment house, a rule adopted under this section must require
that:
(1) a rental agreement contain:
(A) a clear written description of the method of
computing the allocation of central system utilities or nonsubmetered
master metered utilities for the apartment house; and
(B) a statement of the average apartment unit monthly
bill for all apartment units for any allocation of central system
utilities' costs or nonsubmetered master metered utility service
costs for the previous calendar year; and
(2) the apartment house owner:
(A) not impose a charge on a tenant in excess of the
actual charge imposed on the owner for utility consumption by the
apartment house; and
(B) maintain adequate records, including utility bills
and records concerning the central system utility or nonsubmetered
master metered utility service consumption of the apartment house,
the charges assessed by the utility, and the allocation of central
system utilities' costs or nonsubmetered master metered utility
service costs to the tenants and make the records available for
inspection by the tenants during normal business hours.
(c) A rule adopted under this section has the same effect as a
rule adopted under Title 2, and an owner, operator, or manager of an
apartment house subject to this subchapter is subject to enforcement

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under Sections 15.021, 15.022, 15.028, 15.029, 15.030, 15.031,

15.032, and 15.033.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER E. LIABILITY FOR RULE VIOLATION

Sec. 184.071. LIABILITY. (a) A landlord who violates a
commission rule relating to submetering of electric utilities
consumed exclusively in a tenant's dwelling unit or a rule relating
to the allocation of central system utility costs or nonsubmetered
master metered electric utility costs is liable to the tenant for:
(1) three times the amount of any overcharge;
(2) a civil penalty equal to one month's rent;
(3) reasonable attorney's fees; and
(4) court costs.
(b) A landlord is not liable for the civil penalty provided by
Subsection (a)(2) if the landlord proves that the landlord's
violation of the rule was an unintentional mistake made in good
faith.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

CHAPTER 185. RATING OF SOLAR ENERGY DEVICES

Sec. 185.001. DEFINITIONS. In this chapter:
(1) "Commission" means the Public Utility Commission of
Texas.
(2) "Solar energy device" means a solar energy collector or
solar energy system that provides for the collection of solar energy
or the subsequent use of that energy as thermal, mechanical, or
electrical energy.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 185.002. COMPLIANCE. A person who rates, labels, or

certifies the performance of a solar energy device in this state
shall comply with the standards adopted by the commission under this
chapter.

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Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 185.003. ADOPTION OF STANDARDS. (a) The commission shall

study and adopt standards for rating solar energy devices. The
standards shall be used in performance labeling and certification of
solar energy devices in this state.
(b) The commission shall examine rating standards and
certification programs used by other states and by industry in
adopting standards under this section.
(c) The commission shall adopt the standards that the
commission finds are the most widely used unless the commission finds
that those standards are not suitable for use in this state. If the
commission finds that a widely used standard is not suitable, the
commission may amend the standard or adopt a standard that the
commission finds suitable.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 185.004. USE OF NATIONAL STANDARDS. If national standards

for rating and certifying solar energy devices are developed by a
federal agency in conjunction with the states and industry, the
commission shall adopt those national standards as the standards for
use in this state.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 185.005. REVIEW OF STANDARDS. The commission shall

periodically review the standards adopted under this chapter and
shall amend those standards as necessary to ensure that the standards
are:
(1) appropriate in view of current technology; and
(2) the same as or similar to the standards widely used by
other states and by industry.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

CHAPTER 186. PROVISIONS TO ENSURE THE RELIABILITY AND INTEGRITY OF

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UTILITY SERVICE
SUBCHAPTER A. CONTINUITY OF UTILITY SERVICE
Sec. 186.001. DEFINITION. In this subchapter, "public utility"
means and includes a private corporation that does business in this
state and has the right of eminent domain, a municipality, or a state
agency, authority, or subdivision engaged in the business of:
(1) generating, transmitting, or distributing electric
energy to the public;
(2) producing, transmitting, or distributing natural or
artificial gas to the public; or
(3) furnishing water to the public.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 186.002. POLICY. (a) Continuous service by a public

utility is essential to the life, health, and safety of the public.
A person's wilful interruption of that service is a public calamity
that cannot be endured.
(b) A public utility is dedicated to public service. The
primary duty of a public utility, including its management and
employees, is to maintain continuous and adequate service at all
times to protect the safety and health of the public against the
danger inherent in the interruption of service.
(c) Each court and administrative agency of this state shall:
(1) recognize the policy stated in this section; and
(2) interpret and apply this subchapter in accordance with
that policy.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 186.003. ENFORCEMENT BY EXECUTIVE DEPARTMENT. In

accordance with Section 186.002, the governor, and the department of
the executive branch of government under the governor's direction,
shall exercise all power available under the constitution and laws of
this state to protect the public from dangers incident to an
interruption in water, electric, or gas utility service in this state
that occurs because of a violation of this subchapter.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

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Sec. 186.004. UNLAWFUL PICKETING, THREATS, OR INTIMIDATION.

(a) A person may not:
(1) picket the plant, premises, or other property of a
public utility with intent to disrupt the service of that utility or
to prevent the maintenance of that service; or
(2) engage in picketing that has the effect of disrupting
the service of a public utility or preventing the maintenance of that
service.
(b) A person may not:
(1) intimidate, threaten, or harass an employee of a public
utility with intent to disrupt the service of the utility or prevent
the maintenance of that service; or
(2) intimidate, threaten, or harass an employee of a public
utility if that conduct has the effect of disrupting the service of
the utility or preventing the maintenance of that service.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 186.005. RESTRAINING ORDER. (a) A district court shall

immediately inquire into the matter if a public utility presents a
verified petition to the court:
(1) alleging that in the judicial district of the court a
person is violating or threatening to violate Section 186.004 and
that the violation or threatened violation will interfere with the
maintenance of adequate water, electric, or gas service; and
(2) describing the acts committed in violation of Section
186.004, or the threatened acts that, if committed, will violate
Section 186.004.
(b) If it appears that there is a violation or threatened
violation of Section 186.004, the court shall immediately issue an
order restraining the person, the person's agent, and any other
person acting with them from committing an act prohibited by that
section.
(c) A restraining order issued under this section is effective
when the petitioner files with the clerk of the court a good and
sufficient bond in an amount set by the court to cover court costs
that may reasonably accrue in connection with the case. A judgment

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rendered in the case may not be superseded pending appeal.

(d) Venue for a suit under this section is in any judicial
district in which the violation or threat to violate occurs.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 186.006. EMPLOYEE RIGHTS. This subchapter does not limit

the right of an employee of a public utility to:
(1) quit work and leave the employer's premises at any time
the employee chooses; or
(2) refuse to report for work when the employee does not
want to report.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 186.007. PUBLIC UTILITY COMMISSION WEATHER EMERGENCY

PREPAREDNESS REPORTS. (a) In this section, "commission" means the
Public Utility Commission of Texas.
(a-1) The commission shall analyze emergency operations plans
developed by electric utilities as defined by Section 31.002, power
generation companies as defined by Section 31.002, municipally owned
utilities, and electric cooperatives that operate generation
facilities in this state and retail electric providers as defined by
Section 31.002 and prepare a weather emergency preparedness report on
power weatherization preparedness. In preparing the report, the
commission shall:
(1) review emergency operations plans on file with the
commission;
(2) analyze and determine the ability of the electric grid
to withstand extreme weather events in the upcoming year;
(3) consider the anticipated weather patterns for the
upcoming year as forecasted by the National Weather Service or any
similar state or national agency; and
(4) make recommendations on improving emergency operations
plans and procedures in order to ensure the continuity of electric
service.
(b) The commission shall require an entity subject to this
section to file an updated emergency operations plan if it finds that
an emergency operations plan on file does not contain adequate

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information to determine whether the entity can provide adequate

electric services.
(c) The commission may adopt rules relating to the
implementation of the report described by Subsection (a-1).
(d) The commission shall submit the report described by
Subsection (a-1) to the lieutenant governor, the speaker of the house
of representatives, and the members of the legislature not later than
September 30 of each even-numbered year.
(e) The commission may submit additional weather emergency
preparedness reports if the commission finds that significant changes
to weatherization techniques have occurred or are necessary to
protect consumers or vital services, or if there have been changes to
statutes or rules relating to weatherization requirements. A report
under this subsection must be submitted not later than:
(1) March 1 for a summer weather emergency preparedness
report; and
(2) September 1 for a winter weather emergency preparedness
report.
(f) The emergency operations plans submitted for a report
described by Subsection (a-1) and any additional plans submitted
under Subsection (e) are public information except for the portions
of the plan considered confidential under Chapter 552, Government
Code, or other state or federal law. If portions of a plan are
designated as confidential, the plan shall be provided to the
commission in a redacted form for public inspection with the
confidential portions removed. An entity within the ERCOT power
region shall provide the entity's plan to ERCOT in its entirety.

Added by Acts 2011, 82nd Leg., R.S., Ch. 1335 (S.B. 1133), Sec. 1,
eff. June 17, 2011.
Amended by:
Acts 2021, 87th Leg., R.S., Ch. 426 (S.B. 3), Sec. 23, eff. June
8, 2021.
Acts 2021, 87th Leg., R.S., Ch. 426 (S.B. 3), Sec. 24, eff. June
8, 2021.

Sec. 186.008. RAILROAD COMMISSION WEATHER EMERGENCY

PREPAREDNESS REPORTS. (a) In this section, "commission" means the
Railroad Commission of Texas.

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(b) The commission shall analyze emergency operations plans

developed by operators of facilities that produce, treat, process,
pressurize, store, or transport natural gas and are included on the
electricity supply chain map created under Section 38.203 and prepare
a weather emergency preparedness report on weatherization
preparedness of those facilities. In preparing the report, the
commission shall:
(1) review any emergency operations plans on file with the
commission;
(2) analyze and determine the ability of the electricity
supply chain, as mapped under Section 38.203, to withstand extreme
weather events in the upcoming year;
(3) consider the anticipated weather patterns for the
upcoming year as forecasted by the National Weather Service or any
similar state or national agency; and
(4) make recommendations on improving emergency operations
plans and procedures in order to ensure the continuity of natural gas
service for the electricity supply chain, as mapped under Section
38.203.
(c) The commission shall require an entity subject to this
section to file an updated emergency operations plan if it finds that
an emergency operations plan on file does not contain adequate
information to determine whether the entity can provide adequate
natural gas services.
(d) The commission may adopt rules relating to the
implementation of the report described by Subsection (b).
(e) The commission shall submit the report described by
Subsection (b) to the lieutenant governor, the speaker of the house
of representatives, and the members of the legislature not later than
September 30 of each even-numbered year.
(f) The commission may submit additional weather emergency
preparedness reports if the commission finds that significant changes
to weatherization techniques have occurred or are necessary to
protect consumers or vital services, or if there have been changes to
statutes or rules relating to weatherization requirements. A report
under this subsection must be submitted not later than:
(1) March 1 for a summer weather emergency preparedness
report; and
(2) September 1 for a winter weather emergency preparedness
report.

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(g) The emergency operations plans submitted for a report

described by Subsection (b) and any additional plans submitted under
Subsection (f) are public information except for the portions of the
plan considered confidential under Chapter 552, Government Code, or
other state or federal law. If portions of a plan are designated as
confidential, the plan shall be provided to the commission in a
redacted form for public inspection with the confidential portions
removed.

Added by Acts 2021, 87th Leg., R.S., Ch. 426 (S.B. 3), Sec. 25, eff.
June 8, 2021.

SUBCHAPTER B. MANIPULATION OF SERVICE FOR CERTAIN LAW ENFORCEMENT

PURPOSES
Sec. 186.021. EMERGENCY INVOLVING HOSTAGE OR ARMED SUSPECT.
(a) In an emergency in which the supervising law enforcement
official having jurisdiction in the geographical area has probable
cause to believe that an armed and barricaded suspect or a person
holding a hostage is committing a crime, the supervising law
enforcement official may order a designated telephone company
security official to cut or otherwise control telephone lines to
prevent telephone communication by the armed suspect or the hostage
holder with a person other than a peace officer or person authorized
by a peace officer.
(b) The serving telephone company in the geographical area of a
law enforcement unit shall designate a telephone company security
official and an alternate to provide all required assistance to law
enforcement officials to carry out this section.
(c) Good faith reliance on an order given by a supervising law
enforcement official under this section is a complete defense to a
civil or criminal action brought against a telephone company or the
company's director, officer, agent, or employee as a result of
compliance with the order.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER C. FRAUDULENT OBTAINING OF SERVICE

Sec. 186.031. DEFINITIONS. In this subchapter:
(1) "Publish" means to communicate information to another

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by any means.
(2) "Telecommunications service" means the transmission of
a message or other information by a public utility, including a
telephone or telegraph company.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 186.032. FRAUDULENTLY OBTAINING TELECOMMUNICATIONS

SERVICES. (a) A person commits an offense if:
(1) knowing that another will use the published information
to avoid payment of a charge for telecommunications service, the
person publishes:
(A) an existing, cancelled, revoked, or nonexistent
telephone number;
(B) a credit number or other credit device; or
(C) a method of numbering or coding that is used in
issuing telephone numbers or credit devices, including credit
numbers; or
(2) the person makes or possesses equipment specifically
designed to be used fraudulently to avoid charges for
telecommunications service.
(b) An offense under this section is a misdemeanor punishable
by a fine of not more than $500, by confinement in jail for not more
than 60 days, or by both, unless the person has been previously
convicted of an offense under this section. A second or subsequent
offense is a felony punishable by a fine of not more than $5,000, by
imprisonment in the Texas Department of Criminal Justice for not less
than two years and not more than five years, or by both.
(c) This section does not apply to an employee of a public
utility who provides telecommunications service while acting in the
course of employment.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2009, 81st Leg., R.S., Ch. 87 (S.B. 1969), Sec. 25.156, eff.
September 1, 2009.

Sec. 186.033. DISPOSITION OF CERTAIN EQUIPMENT. (a) A peace

officer may seize equipment described by Section 186.032(a)(2) under

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a warrant or incident to a lawful arrest.

(b) If the person who possessed equipment seized under
Subsection (a) is convicted under Section 186.032, the court entering
the judgment of conviction shall order the sheriff to destroy the
equipment.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER D. AVAILABILITY OF EMERGENCY TELEPHONE SERVICE

Sec. 186.041. DEFINITIONS. In this subchapter:
(1) "Emergency" means a situation in which property or
human life is in jeopardy and the prompt summoning of aid is
essential.
(2) "Party line" means a subscriber's telephone circuit,
consisting of two or more main telephone stations connected with the
circuit, each station with a distinctive ring or telephone number.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 186.042. OBSTRUCTION OF EMERGENCY TELEPHONE CALL;

PENALTY. (a) A person commits an offense if:
(1) the person wilfully refuses to relinquish a party line
immediately on being informed that the line is needed for an
emergency call described by Subdivision (2); and
(2) the party line is needed for an emergency call:
(A) to a fire or police department; or
(B) for medical aid or an ambulance service.
(b) An offense under this section is a misdemeanor punishable
by:
(1) a fine of not less than $25 and not more than $500;
(2) confinement in the county jail for not more than one
month; or
(3) both fine and confinement.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 186.043. FALSIFICATION OF EMERGENCY TELEPHONE CALL;

PENALTY. (a) A person commits an offense if the person secures the

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use of a party line by falsely stating that the line is needed for an
emergency call:
(1) to a fire or police department; or
(2) for medical aid or an ambulance service.
(b) An offense under this section is a misdemeanor punishable
by:
(1) a fine of not less than $25 and not more than $500;
(2) confinement in the county jail for not more than one
month; or
(3) both fine and confinement.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 186.044. NOTICE OF CERTAIN OFFENSES REQUIRED. (a) A

telephone directory distributed to the public in this state that
lists the telephone numbers of an exchange located in this state must
contain a notice explaining the offenses under Sections 186.042 and
186.043. The notice must be:
(1) printed in type not smaller than the smallest type on
the same page; and
(2) preceded by the word "warning" printed in type at least
as large as the largest type on the same page.
(b) At least once each year, a person providing telephone
service shall enclose in the telephone bill mailed to each person who
uses a party line telephone a notice of Sections 186.042 and 186.043.
(c) This section does not apply to a directory, commonly known
as a classified directory, that is distributed solely for business
advertising purposes.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 186.045. FAILURE TO PROVIDE NOTICE; PENALTY. (a) A

person providing telephone service commits an offense if the person:
(1) distributes copies of a telephone directory subject to
Section 186.044(a) from which the notice required by that section is
wilfully omitted; or
(2) wilfully fails to enclose in telephone bills the notice
required by Section 186.044(b).
(b) An offense under this section is a misdemeanor punishable

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by a fine of not less than $25 and not more than $500.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER E. CONSTRUCTION AND MAINTENANCE OF FACILITIES ALONG, OVER,

UNDER, OR ACROSS RAILROAD RIGHT-OF-WAY
Sec. 186.051. DEFINITIONS. In this subchapter:
(1) "Cable operator" means an entity that owns or operates
a cable system, as that term is defined by 47 U.S.C. Section 522, as
amended.
(2) "Common carrier" means a common carrier as described by
Section 111.002, Natural Resources Code, or a person who submits to
regulation by the state as a common carrier under Article 2.01, Texas
Business Corporation Act.
(3) "Energy transporter" means a person who gathers or
transports oil, gas, or oil and gas products by pipeline.
(4) "Railroad" means an entity that owns, operates, or
controls a railroad or property or assets owned or previously owned
by a railroad in this state, including agents, assignees, or parties
that by contract own, control, or manage railroad rights-of-way,
easements, or other real property rights belonging to a railroad.
The term includes interurban and street railroads owned by a private
entity but excludes a terminal railroad and a railroad or interurban
and street railroad owned by a governmental entity, including a
navigation district or port authority, or a wharf.
(5) "Railroad right-of-way" means the real property rights
owned or controlled by a railroad, including fee and easement
interests used or previously used as a railroad operating corridor.
(6) "Utility" means:
(A) a gas, water, electric, or telecommunications
entity that is defined as a utility under the laws of this state;
(B) an electric cooperative; or
(C) a municipally owned utility.

Added by Acts 2003, 78th Leg., ch. 1087, Sec. 2, eff. Sept. 1, 2003.

Sec. 186.052. EXEMPTIONS. (a) The inclusion of an energy

transporter or cable operator in this subchapter does not subject the
transporter or operator to regulation as a utility or common carrier.

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(b) The inclusion of a common carrier in this subchapter does

not subject the carrier to regulation as a utility.

Added by Acts 2003, 78th Leg., ch. 1087, Sec. 2, eff. Sept. 1, 2003.

Sec. 186.053. APPLICABILITY. (a) Except as provided by

Section 186.058, this subchapter applies only to facilities along,
over, under, or across a railroad or railroad right-of-way in place
under a license, agreement, or nonperpetual easement.
(b) In relation to cable operators, this subchapter applies
only to those lines over which the cable operator is offering or
transporting high-speed Internet or broadband information services.

Added by Acts 2003, 78th Leg., ch. 1087, Sec. 2, eff. Sept. 1, 2003.

Sec. 186.054. CONSTRUCTION AND MAINTENANCE OF UTILITY, COMMON

CARRIER, CABLE OPERATOR, AND ENERGY TRANSPORTER FACILITIES. (a) A
utility, common carrier, cable operator, or energy transporter may
acquire an easement by eminent domain along, over, under, or across a
railroad or railroad right-of-way as provided by this subchapter to
maintain, operate, or upgrade its facilities consistent with
preexisting licenses or agreements.
(b) A utility, common carrier, cable operator, or energy
transporter:
(1) shall provide notice to the railroad within a
reasonable period of any proposed activity relating to the
construction, maintenance, or operation of the facilities; and
(2) may not unreasonably interfere with railroad
operations.
(c) Absent terms to the contrary in an easement acquired by
condemnation under this subchapter, existing license, or agreement, a
railroad may require a utility, common carrier, cable operator, or
energy transporter to relocate any portion of a facility that is
located in the railroad right-of-way that is not in the public right-
of-way if:
(1) a reasonable alternate route is available;
(2) a reasonable amount of time is provided;
(3) substantial interference with the railroad operations
is established; and

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(4) the railroad reimburses the utility, common carrier,

cable operator, or energy transporter for the reasonable cost of
relocation.

Added by Acts 2003, 78th Leg., ch. 1087, Sec. 2, eff. Sept. 1, 2003.

Sec. 186.055. DOCUMENTATION OF RIGHTS ACQUIRED. If a railroad

requires a utility, common carrier, cable operator, or energy
transporter to obtain from the railroad a right to use a railroad
right-of-way, the railroad shall produce, if requested in writing,
the readily available documentation from the railroad's records
indicating the extent of the railroad's right, title, or interest in
the property sought to be used by the utility, common carrier, cable
operator, or energy transporter. The utility, common carrier, cable
operator, or energy transporter shall reimburse the railroad for the
reasonable cost of producing the documentation as required by this
section. The reimbursable cost, including internal costs, may not
exceed $500, unless the parties agree otherwise. A railroad that
produces documentation as provided by this section is not limited or
prevented from asserting a right, title, or interest in real property
based on documentation that has not been produced under this section.

Added by Acts 2003, 78th Leg., ch. 1087, Sec. 2, eff. Sept. 1, 2003.

Sec. 186.056. VALUATION OF RIGHTS ACQUIRED. (a) In the

absence of an agreement to convey a permanent easement for the
continued right to use a preexisting facility located in a railroad
right-of-way, a utility, common carrier, cable operator, or energy
transporter may obtain the right to continuously use the right-of-way
through the exercise of eminent domain under Chapter 21, Property
Code.
(b) The award of damages due the railroad under an eminent
domain proceeding as provided by Subsection (a) is:
(1) the market value of the real property interest to be
used; and
(2) if a portion of the railroad's right-of-way is taken,
damages, if any, to the railroad's remaining property.
(c) The railroad may also recover:
(1) reasonable costs and expenses for interference with

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railroad operations, including internal costs for providing flagging

services; and
(2) reasonable costs and expenses to repair any damage to
its facilities caused by the maintenance, operation, or upgrade of
the preexisting utility, common carrier, cable operator, or energy
transporter facilities.
(d) The payment by the utility, common carrier, cable operator,
or energy transporter determined under this section is the only
compensation due to the railroad for the perpetual use of the
interest obtained.

Added by Acts 2003, 78th Leg., ch. 1087, Sec. 2, eff. Sept. 1, 2003.

Sec. 186.057. RIGHT TO MAINTAIN FACILITIES. (a) A utility,

common carrier, cable operator, or energy transporter may not be
required to remove an existing facility for 180 days after the date
the utility, common carrier, cable operator, or energy transporter
receives a written notice from the railroad that an existing facility
must be removed from the railroad's right-of-way if:
(1) the facility was located along, under, over, or across
the railroad right-of-way with the written consent of the railroad;
and
(2) the utility, common carrier, cable operator, or energy
transporter is not in default under an agreement with the railroad.
(b) If a utility, common carrier, cable operator, or energy
transporter requests documentation under Section 186.055, the 180-day
period provided by Subsection (a) is tolled until the utility, common
carrier, cable operator, or energy transporter receives a written
response to its request from the railroad.
(c) If a utility, common carrier, cable operator, or energy
transporter does not condemn or enter into an agreement regarding the
disputed area involving the railroad's right-of-way within the 180-
day period provided by Subsection (a) or any extended period provided
by Subsection (b), the license or agreement between the utility,
common carrier, cable operator, or energy transporter and the
railroad is terminated.
(d) The possessory right provided by this section is in
addition to any possessory right provided by Chapter 21, Property
Code.

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Added by Acts 2003, 78th Leg., ch. 1087, Sec. 2, eff. Sept. 1, 2003.

Sec. 186.058. LICENSE AND RENEWAL. (a) A utility, common

carrier, cable operator, or energy transporter may obtain an original
license or renew a license for the right to use a railroad right-of-
way for a one-time fee paid based on:
(1) the agreement of the railroad and the utility, common
carrier, cable operator, or energy transporter; or
(2) a mutually acceptable third-party determination of
market value.
(b) A fee paid under this section is the only fee payment
required. The license remains in effect without the requirement of
additional fee payments for renewal of the license.
(c) The terms of the license or license renewal may provide
that the railroad is not later subject to this subchapter, except the
railroad continues to be subject to eminent domain authority granted
by other law.

Added by Acts 2003, 78th Leg., ch. 1087, Sec. 2, eff. Sept. 1, 2003.

Sec. 186.059. RESTRICTIONS ON PAYMENT OF COSTS AWARDED AGAINST

RAILROAD IN CONDEMNATION. If the special commissioners or a court
awards costs against a railroad under Section 21.047, Property Code,
because the award of damages to the railroad is equal to or less than
the amount the utility, common carrier, cable operator, or energy
transporter exercising the right of eminent domain under this
subchapter offered to pay, the costs awarded against the railroad
must be paid by the railroad without reimbursement by or contribution
from any agent or representative, including an agent or
representative that handled or assisted in the condemnation
proceedings.

Added by Acts 2003, 78th Leg., ch. 1087, Sec. 2, eff. Sept. 1, 2003.

Sec. 186.060. CUMULATIVE RIGHTS AND RESPONSIBILITIES. The

rights, privileges, and responsibilities provided by this subchapter
are in addition to and not in diminution of or substitution for those
rights granted by any other state or federal law.

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Added by Acts 2003, 78th Leg., ch. 1087, Sec. 2, eff. Sept. 1, 2003.

Sec. 186.061. EFFECT ON OTHER LAW. This subchapter does not

affect the elements a condemnor must establish by law to acquire real
property.

Added by Acts 2003, 78th Leg., ch. 1087, Sec. 2, eff. Sept. 1, 2003.

TITLE 5. PROVISIONS AFFECTING THE OPERATION OF UTILITY FACILITIES

CHAPTER 251. UNDERGROUND FACILITY DAMAGE PREVENTION AND SAFETY
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 251.001. SHORT TITLE. This chapter may be cited as the
Underground Facility Damage Prevention and Safety Act.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 18.17(a), eff. Sept. 1,
1999.

Sec. 251.002. DEFINITIONS. In this chapter:

(1) "Class A underground facility" means an underground
facility that is used to produce, store, convey, transmit, or
distribute:
(A) electrical energy;
(B) natural or synthetic gas;
(C) petroleum or petroleum products;
(D) steam;
(E) any form of telecommunications service, including
voice, data, video, or optical transmission, or cable television
service; or
(F) any other liquid, material, or product not defined
as a Class B underground facility.
(2) "Class B underground facility" means an underground
facility that is used to produce, store, convey, transmit, or
distribute:
(A) water;
(B) slurry; or
(C) sewage.
(3) "Corporation" means the Texas Underground Facility
Notification Corporation.

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(4)"Damage" means:
(A) the defacing, scraping, displacement, penetration,
destruction, or partial or complete severance of an underground
facility or of any protective coating, housing, or other protective
device of an underground facility;
(B) the weakening of structural or lateral support of
an underground facility; or
(C) the failure to properly replace the backfill
covering an underground facility.
(5) "Excavate" means to use explosives or a motor, engine,
hydraulic or pneumatically powered tool, or other mechanized
equipment of any kind and includes auguring, backfilling, boring,
compressing, digging, ditching, drilling, dragging, dredging,
grading, mechanical probing, plowing-in, pulling-in, ripping,
scraping, trenching, and tunneling to remove or otherwise disturb
soil to a depth of 16 or more inches.
(6) "Excavator" means a person that excavates or intends to
excavate in this state.
(7) "Exploration and production underground facility" means
an underground facility used by a person producing gas or oil, or
both, for the production of that gas or oil, including facilities
used for field separation, treatment, gathering, or storage of gas or
oil.
(8) "High speed data transmission" means a method of data
transmission that does not include facsimile or voice transmission.
(9) "Legal holiday" means a holiday specified as a legal
holiday by Subchapter B, Chapter 662, Government Code.
(10) "Mechanized equipment" means equipment operated by
mechanical power, including a trencher, bulldozer, power shovel,
auger, backhoe, scraper, drill, cable or pipe plow, and other
equipment used to plow in or pull in cable or pipe.
(11) "Operator" means a person that operates an underground
facility.
(12) "Secured facility" means a parcel of land used for
commercial or industrial purposes that is surrounded entirely by a
fence or other means of preventing access, including a fence with one
or more gates that are locked at all times or monitored by an
individual who can prevent unauthorized access.
(13) "Underground facility" means a line, cable, pipeline
system, conduit, or structure that is located partially or totally

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underground and that is used to produce, store, convey, transmit, or

distribute telecommunications, electricity, gas, water, sewage,
steam, or liquids such as petroleum, petroleum products, or hazardous
liquids.
(14) "Saturday notification" means a notice of intent to
excavate provided by an excavator to a notification center on a
Saturday before 11:59 a.m.
(15) "Violation" means a violation of Section 251.151,
251.152, or 251.159.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 18.17(a), eff. Sept. 1,
1999.

Sec. 251.003. EXEMPTIONS. The following are not subject to

this chapter as underground facilities:
(1) an aboveground or underground storage tank, sump, or
impoundment or piping connected to an aboveground or underground
storage tank, sump, or impoundment located in the same tract of land
as the storage tank, sump, or impoundment;
(2) an underground facility operated by the owner of a
secured facility and located entirely within the secured facility;
(3) an underground facility that serves only the owner of
the underground facility or the owner's tenant and that is located
solely on the owner's property;
(4) piping within a well bore;
(5) the portion of an exploration and production
underground facility that is located within the boundaries of the oil
or gas field from which the oil and gas is produced and that is not
located in the boundaries of an established easement or right-of-way
granted for the benefit of a governmental entity or a private entity
if the easement or right-of-way is granted for a public purpose; or
(6) an underground facility that serves a cemetery and is
located solely on the cemetery's property.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 18.17(a), eff. Sept. 1,
1999.

Sec. 251.004. APPLICATION TO CERTAIN CONTRACTORS AND STATE

EMPLOYEES. (a) This chapter does not apply to a contractor working

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in the public right-of-way under a contract with the Texas Department

of Transportation.
(b) Excavation by an employee of the Texas Department of
Transportation on a segment of the state highway system is not
subject to this chapter if the excavation is more than 10 feet from
the right-of-way line.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 18.17(a), eff. Sept. 1,
1999. Amended by Acts 2003, 78th Leg., ch. 1276, Sec. 17.004(a),
eff. Sept. 1, 2003.

Sec. 251.005. CONVERSION OF FACILITY OR OPERATOR. (a) An

operator of an underground facility that is exempted under this
subchapter may voluntarily convert that facility to a Class A
underground facility by sending written communication from a
competent authority of the operator to the corporation advising of
the status change.
(b) An operator of a Class B underground facility may
voluntarily convert to a Class A underground facility operator by
sending written communication from a competent authority of the
operator to the corporation advising of the status change.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 18.17(a), eff. Sept. 1,
1999.

Sec. 251.006. COMPLIANCE BY PERMIT HOLDERS. (a) The fact that

a person has a legal permit, permission from the owner of the
property or the owner's licensee, or an easement to conduct
excavation operations does not affect the person's duty to comply
with this chapter.
(b) Compliance with this chapter does not affect a person's
responsibility to obtain a permit required by law.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 18.17(a), eff. Sept. 1,
1999.

Sec. 251.007. FACILITY ON COUNTY OR MUNICIPAL ROAD. This

chapter does not affect a contractual or statutory right of a county

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or municipality to require an operator to relocate, replace, or

repair its underground facility.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 18.17(a), eff. Sept. 1,
1999.

Sec. 251.008. EFFECT ON CIVIL REMEDIES. Except as otherwise

specifically provided by this chapter, this chapter, including
Section 251.201, does not affect any civil remedy for personal injury
or for property damage, including any damage to an underground
facility.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 18.17(a), eff. Sept. 1,
1999.

Sec. 251.009. PROVISION OF GENERAL INFORMATION. At least once

each calendar year, at intervals not exceeding 15 months, each Class
A underground facility operator who conveys, transmits, or
distributes by means of its underground facilities service directly
to more than one million residential customers within this state
shall provide all of its residential customers in this state general
information about excavation activities covered by this chapter and
the statewide toll-free telephone number established by the
corporation.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 18.17(a), eff. Sept. 1,
1999.

SUBCHAPTER B. TEXAS UNDERGROUND FACILITY NOTIFICATION CORPORATION

Sec. 251.051. PURPOSE. The Texas Underground Facility
Notification Corporation provides statewide notification services
under this chapter.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 18.17(a), eff. Sept. 1,
1999.

Sec. 251.052. NONPROFIT CORPORATION. The corporation is a

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public nonprofit corporation and has all the powers and duties
incident to a nonprofit corporation under the Texas Non-Profit
Corporation Act (Article 1396-1.01 et seq., Vernon's Texas Civil
Statutes), except that the corporation:
(1) may not make donations for the public welfare or for
charitable, scientific, or educational purposes or in aid of war
activities;
(2) may not merge or consolidate with another corporation;
(3) is not subject to voluntary or involuntary dissolution;
and
(4) may not be placed in receivership.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 18.17(a), eff. Sept. 1,
1999.

Sec. 251.053. APPLICATION OF OPEN MEETINGS AND OPEN RECORDS

LAWS. The corporation is subject to Chapters 551 and 552, Government
Code, except that the corporation may not disseminate, make
available, or otherwise distribute service area map data or
information provided by an operator unless that action is necessary
to perform the corporation's specific obligations under this chapter.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 18.17(a), eff. Sept. 1,
1999.

Sec. 251.054. EXPENSES AND LIABILITIES OF CORPORATION. (a)

All expenses of the corporation shall be paid from income of the
corporation.
(b) A liability created by the corporation is not a debt of
this state, and the corporation may not secure a liability with funds
or assets of this state.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 18.17(a), eff. Sept. 1,
1999.

Sec. 251.055. BOARD OF DIRECTORS. (a) The board of directors

of the corporation is composed of the following 12 members appointed
by the governor:

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(1) six representatives of the general public;

(2) one representative of the gas industry;
(3) one representative of the telecommunications industry;
(4) one representative of the electric industry;
(5) one representative of cable television companies;
(6) one representative of municipalities; and
(7) one representative of persons who engage in excavation
operations who are not also facility operators.
(b) Board membership is voluntary and a director is not
entitled to receive compensation for serving on the board.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 18.17(a), eff. Sept. 1,
1999.

Sec. 251.056. TERMS. (a) Directors serve staggered three-year

terms, with the terms of four directors expiring each August 31.
(b) A director serves until the director's successor is
appointed by the governor and assumes office.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 18.17(a), eff. Sept. 1,
1999.

Sec. 251.057. DECLARATION OF BOARD VACANCY. (a) The board may

declare a director's office vacant if the director ceases to be
associated with the industry or an operator the director represents.
(b) Not later than the 60th day after the date a vacancy on the
board is declared, the governor shall appoint a person to fill the
vacancy for the remainder of the unexpired term.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 18.17(a), eff. Sept. 1,
1999.

Sec. 251.058. OFFICERS. (a) The board shall elect from among
its directors a chair and vice chair.
(b) The chair and vice chair serve for a term of one year and
may be reelected.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 18.17(a), eff. Sept. 1,

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1999.

Sec. 251.059. ENTITLEMENT TO VOTE. The corporation's bylaws

must provide that each director is entitled to one vote.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 18.17(a), eff. Sept. 1,
1999.

Sec. 251.060. DUTIES OF CORPORATION. The corporation shall

develop and implement processes to:
(1) maintain a registration of:
(A) notification centers as provided by Section
251.101(a)(3);
(B) operators who elect to convert facilities to Class
A facilities under Section 251.005(a); or
(C) operators who elect to become Class A underground
facility operators under Section 251.005(b);
(2) establish minimum technical standards used by
notification centers;
(3) establish a statewide toll-free telephone number to be
used by excavators that incorporates the use of a call router system
that routes calls to the notification centers on a pro rata basis;
(4) oversee the bid process and select the vendor for the
statewide toll-free telephone number;
(5) oversee the bid process and select the vendor for the
call router system;
(6) determine before May 1 of each year the cost-sharing
between the notification centers of:
(A) the toll-free telephone number; and
(B) the call router system prescribed by Section
251.102(4);
(7) develop public service announcements to educate the
public about statewide one-call notification and its availability;
(8) establish a format for information transfer among
notification centers other than high speed data transmission, if
appropriate;
(9) on a complaint concerning charges, investigate and
determine appropriate charges;

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(10) recommend a civil penalty against a notification

center that does not meet the requirements of this chapter of not
less than $1,000 or more than $5,000 for each violation;
(11) refer the recommended penalty to the attorney general,
who shall institute a suit in a court of competent jurisdiction to
recover the penalty;
(12) assist in dispute resolution among notification
centers or between a notification center and an operator;
(13) assist any operator who encounters difficulty in
joining a notification center; and
(14) review and study design standards for the placement of
underground facilities throughout this state.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 18.17(a), eff. Sept. 1,
1999.

Sec. 251.061. CONTRACT FOR STATEWIDE TOLL-FREE NUMBER AND CALL

ROUTER SYSTEM. (a) The corporation shall solicit proposals for the
contract to establish and operate the statewide toll-free telephone
number and the call router system by using a request for proposals
process that includes specifications that have been approved by the
board of directors in accordance with this chapter.
(b) The corporation is not required to award the contract to
the lowest offeror if the terms of another proposal would result in a
lower annual cost and are more advantageous to the corporation and
its members. The corporation may reject all proposals if the
corporation finds that none of the proposals is acceptable.
(c) After the proposals are opened, each document relating to
the consideration of a proposal or the award of a contract and the
text of the contract are considered books and records of the
corporation for the purposes of Article 2.23, Texas Non-Profit
Corporation Act (Article 1396-2.23, Vernon's Texas Civil Statutes).

Added by Acts 1999, 76th Leg., ch. 62, Sec. 18.17(a), eff. Sept. 1,
1999.

Sec. 251.062. FEES AND RATES. (a) Except as provided by this

section, the corporation may not, for any reason, impose an
assessment, fee, or other charge, including a charge for inputting

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data, against an operator.

(b) Before January 15 of each year, a Class A facility operator
shall pay to the corporation a fee of $50 for services to be
performed by the corporation during that calendar year. A fee for a
part of a year may not be prorated.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 18.17(a), eff. Sept. 1,
1999.

SUBCHAPTER C. NOTIFICATION CENTERS

Sec. 251.101. NOTIFICATION CENTER. (a) A notification center
is a legal entity that:
(1) operates a notification system capable of serving
excavators and operators statewide;
(2) is created to:
(A) receive notification of an intent to excavate and
of damage to an underground facility and disseminate that information
to member operators that may be affected by the excavation or damage
and to other notification centers operating in this state; and
(B) receive notification of an extraordinary
circumstance and disseminate that information to member operators and
to other notification centers operating in this state; and
(3) registers the following information with the
corporation:
(A) its name, address, and telephone number;
(B) the name of a contact person;
(C) a statement of compliance with Section 251.104;
and
(D) a listing of the counties in which it operates.
(b) A notification center operating on September 1, 1997, may
continue to operate if the notification center complies with this
chapter.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 18.17(a), eff. Sept. 1,
1999.

Sec. 251.102. GENERAL DUTIES OF NOTIFICATION CENTER. A

notification center shall:
(1) operate 24 hours a day every day of the year;

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(2) have the capability to receive emergency information 24

hours a day from excavators and disseminate the information as soon
as it is received to the appropriate operators and to all registered
and affected notification centers operating in this state;
(3) have the capacity to receive extraordinary circumstance
information 24 hours a day from operators and disseminate the
information as soon as it is received to all registered and affected
notification centers;
(4) submit to the corporation, not later than May 15 of
each year, a pro rata share of the expense, as established by the
corporation, of the statewide toll-free telephone number and the call
router;
(5) provide, on request of an excavator, a contact name and
telephone number of a representative of the operator for special
circumstances; and
(6) have personnel capable of assisting Spanish-speaking
customers.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 18.17(a), eff. Sept. 1,
1999.

Sec. 251.103. RECORDS. (a) A notification center shall

maintain for not less than four years a record to document:
(1) the receipt of a notice of:
(A) intent to excavate;
(B) damage to an underground facility;
(C) an emergency excavation; and
(D) an extraordinary circumstance;
(2) the information the excavator is required to provide to
the notification center under this chapter;
(3) contact with operators and other notification centers;
and
(4) the information the notification center provided to the
excavator.
(b) A notification center may not destroy records that relate
to any matter that is involved in litigation if the notification
center is placed on notice that the litigation has not been finally
resolved.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 18.17(a), eff. Sept. 1,

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1999.

Sec. 251.104. INSURANCE. A notification center shall, at all

times, maintain a minimum of $5 million professional liability and
errors and omissions insurance to cover duties prescribed by this
chapter.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 18.17(a), eff. Sept. 1,
1999.

Sec. 251.105. FEES AND CHARGES. (a) A notification center

that notifies another notification center under Section 251.102(2) or
(3) or Section 251.153(b) shall recover an amount not exceeding the
actual cost of providing the notice from the notification center
receiving the notice.
(b) The notification center shall charge a Class A underground
facility operator not more than $1.25 for a call made to the system
that affects the operator. The board may increase or decrease the
maximum charge only on an affirmative vote of at least two-thirds of
the total number of votes entitled to be cast. A notification center
may petition the corporation for an increase in the maximum charge
and is entitled to the increase on proof that costs exceed the
maximum charge.
(c) The notification center may not charge an operator any
additional fee such as an initiation fee, a membership fee, or a set-
up fee.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 18.17(a), eff. Sept. 1,
1999.

Sec. 251.106. PAYMENTS TO CORPORATION. Each time a

notification center receives a call from an excavator under Section
251.151, the notification center shall pay the corporation five
cents. The corporation shall waive this charge for the remainder of
any year in which the corporation receives $250,000 under this
section.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 18.17(a), eff. Sept. 1,

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1999. Amended by Acts 2001, 77th Leg., ch. 652, Sec. 1, eff. Sept.
1, 2001.

Sec. 251.107. DUTY TO PARTICIPATE IN NOTIFICATION CENTER. (a)

Each operator of a Class A underground facility, including a
political subdivision of this state, shall participate in a
notification center as a condition of doing business in this state.
(b) Each operator of a Class A underground facility shall
provide to the notification center:
(1) maps or grid locations or other identifiers determined
by the operator indicating the location of the operator's underground
facilities;
(2) the name and telephone number of a contact person or
persons; and
(3) at least quarterly but, if possible, as those changes
occur, information relating to each change in the operator's maps or
grid locations or other identifiers or in the person or persons
designated as the operator's contact person or persons.
(c) The notification center may not require an operator to
conduct a survey of the operator's underground facilities or alter
the operator's existing signage.
(d) A notification center may not disseminate, make available,
or otherwise distribute maps or information provided by an operator
unless that action is necessary to perform the notification center's
specific obligations under this chapter.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 18.17(a), eff. Sept. 1,
1999.

SUBCHAPTER D. REQUIREMENTS RELATING TO EXCAVATION

Sec. 251.151. DUTY OF AN EXCAVATOR. (a) Except as provided by
Sections 251.155 and 251.156, a person who intends to excavate shall
notify a notification center not earlier than the 14th day before the
date the excavation is to begin or later than the 48th hour before
the time the excavation is to begin, excluding Saturdays, Sundays,
and legal holidays.
(b) Notwithstanding Subsection (a), if an excavator makes a
Saturday notification, the excavator may begin the excavation the

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following Tuesday at 11:59 a.m. unless the intervening Monday is a

holiday. If the intervening Monday is a holiday, the excavator may
begin the excavation the following Wednesday at 11:59 a.m.
(c) To have a representative present during the excavation, the
operator shall contact the excavator and advise the excavator of the
operator's intent to be present during excavation and confirm the
start time of the excavation. If the excavator wants to change the
start time, the excavator shall notify the operator to set a mutually
agreed-to time to begin the excavation.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 18.17(a), eff. Sept. 1,
1999.

Sec. 251.152. INFORMATION INCLUDED IN NOTICE. The excavator

shall include in the notice required under Section 251.151:
(1) the name of the person serving the notice;
(2) the location of the proposed area of excavation,
including:
(A) the street address, if available, and the location
of the excavation at the street address; or
(B) if there is no street address, an accurate
description of the excavation area using any available designations
such as the closest street, road, or intersection;
(3) the name, address, and telephone number of the
excavator or the excavator's company;
(4) the excavator's field telephone number, if one is
available;
(5) a telephone facsimile number, e-mail address, or
another electronic number or address approved by the board to which
an operator may send the notification required by Section 251.157(d);
(6) the starting date and time and the anticipated
completion date of excavation; and
(7) a statement as to whether explosives will be used.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 18.17(a), eff. Sept. 1,
1999. Amended by Acts 2001, 77th Leg., ch. 858, Sec. 1, eff. Nov. 1,
2001.

Sec. 251.153. DUTY OF NOTIFICATION CENTER. (a) At the time an

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excavator provides a notification center with the excavator's intent

to excavate, the notification center shall advise the excavator that
water, slurry, and sewage underground facilities in the area of the
proposed excavation may not receive information concerning the
excavator's proposed excavation.
(b) Not later than two hours after the time the notification
center receives a notice of intent to excavate from an excavator, the
notification center shall provide to every other affected
notification center operating in this state the information required
by Section 251.152 and received from the excavator. The notification
center shall provide the information by the use of high speed data
transmission.
(c) Not later than two hours after the time the notification
center receives a notice of intent to excavate from an excavator or
from a different notification center, the notification center shall
notify each member operator that may have an underground facility in
the vicinity of the proposed excavation operation.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 18.17(a), eff. Sept. 1,
1999.

Sec. 251.154. NOTIFICATION BY AN EXCAVATOR. (a) A person

required to provide notice under this chapter is considered to have
provided the notice when the person delivers the required information
and a notification center receives that information within the time
limits prescribed by this chapter.
(b) A person may deliver information required under this
chapter by any appropriate method, including the use of any
electronic means of data transfer.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 18.17(a), eff. Sept. 1,
1999.

Sec. 251.155. EXCEPTION IN CASE OF EMERGENCY; OFFENSE. (a)

Section 251.151 does not apply to an emergency excavation that is
necessary to respond to a situation that endangers life, health, or
property or a situation in which the public need for uninterrupted
service and immediate reestablishment of service if service is
interrupted compels immediate action.

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(b) The excavator may begin emergency excavation under

Subsection (a) immediately and shall take reasonable care to protect
underground facilities.
(c) When an emergency exists, the excavator shall notify a
notification center as promptly as practicably possible.
(d) An excavator may not misrepresent a fact or circumstance
used in the determination of an emergency excavation under Subsection
(a). A person that violates this subsection is subject to a penalty
under:
(1) Section 251.201;
(2) Section 251.203; or
(3) both Section 251.201 and Section 251.203.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 18.17(a), eff. Sept. 1,
1999.
Amended by:
Acts 2011, 82nd Leg., R.S., Ch. 184 (S.B. 1217), Sec. 1, eff.
September 1, 2011.

Sec. 251.156. OTHER EXCEPTIONS TO DUTY OF EXCAVATORS. (a)

Section 251.151 does not apply to:
(1) interment operations of a cemetery;
(2) operations at a secured facility if:
(A) the excavator operates each underground facility at
the secured facility, other than those within a third-party
underground facility easement or right-of-way; and
(B) the excavation activity is not within a third-party
underground facility or right-of-way;
(3) routine railroad maintenance within 15 feet of either
side of the midline of the track if the maintenance will not disturb
the ground at a depth of more than 18 inches;
(4) activities performed on private property in connection
with agricultural operations;
(5) operations associated with the exploration or
production of oil or gas if the operations are not conducted within
an underground facility easement or right-of-way;
(6) excavations by or for a person that:
(A) owns, leases, or owns a mineral leasehold interest
in the real property on which the excavation occurs; and

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(B) operates all underground facilities located at the

excavation site; or
(7) routine maintenance by a county employee on a county
road right-of-way to a depth of not more than 24 inches.
(b) If a person excepted under Subsection (a)(4) elects to
comply with this chapter and the operator fails to comply with this
chapter, the person is not liable to the underground facility owner
for damages to the underground facility.
(c) In this section:
(1) "Agricultural operations" means activities performed on
land and described by Section 23.51(2), Tax Code.
(2) "Routine maintenance" means operations, not to exceed
24 inches in depth, within a road or drainage ditch involving grading
and removal or replacement of pavement and structures.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 18.17(a), eff. Sept. 1,
1999.

Sec. 251.157. DUTY OF OPERATOR TO PERSON EXCAVATING. (a) Each

Class A underground facility operator contacted by the notification
system shall mark the approximate location of its underground
facilities at or near the site of the proposed excavation if the
operator believes that marking the location is necessary. The
operator shall mark the location not later than:
(1) the 48th hour after the time the excavator gives to the
notification system notice of intent to excavate, excluding
Saturdays, Sundays, and legal holidays;
(2) 11:59 a.m. on the Tuesday following a Saturday
notification unless the intervening Monday is a holiday;
(3) 11:59 a.m. on the Wednesday following a Saturday
notification if the intervening Monday is a holiday; or
(4) a time agreed to by the operator and the excavator.
(b) An operator shall refer to the American Public Works
Association color coding standards when marking.
(c) An excavator who has fully complied with this chapter may
not be liable for damage to an underground facility that was not
marked in accordance with this chapter.
(d) Not later than the 48th hour after the time the excavator
gives to the notification center notice of intent to excavate, an

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operator contacted by the notification center shall notify the

excavator of the operator's plans to not mark the proximate location
of an underground facility at or near the site of the proposed
excavation. The operator must provide the notification by e-mail or
facsimile or by another verifiable electronic method approved by the
board.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 18.17(a), eff. Sept. 1,
1999. Amended by Acts 2001, 77th Leg., ch. 858, Sec. 2, eff. Nov. 1,
2001.

Sec. 251.158. DUTY OF OPERATOR IN EVENT OF AN EXTRAORDINARY

CIRCUMSTANCE. (a) The deadline prescribed by Section 251.157(a)
does not apply if the operator experiences an extraordinary
circumstance due to an act of God, including a tornado, a hurricane,
an ice storm, or a severe flood, or a war, riot, work stoppage, or
strike that limits personnel or resources needed to fulfill the
operator's obligations under this chapter.
(b) The operator shall notify a notification center of the
extraordinary circumstance and shall include in the notification:
(1) the nature and location of the extraordinary
circumstance;
(2) the expected duration of the situation and the
approximate time at which the operator will be able to resume
location request activities; and
(3) the name and telephone number of the individual that
the notification system can contact if there is an emergency that
requires the operator's immediate attention.
(c) In addition to the notification required by Subsection (b),
the operator shall also notify each excavator that has a pending
location request in the location where an extraordinary circumstance
is being experienced and shall include in the notification:
(1) the fact that the operator is experiencing an
extraordinary circumstance; and
(2) the approximate time at which the operator will mark
the requested location.
(d) A notification center shall inform each excavator notifying
the system under Section 251.151 that the operator's location request
activities are suspended until the extraordinary circumstance has

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discontinued or has been corrected within the affected location.

(e) An excavator is relieved from all provisions of this
chapter until the operator notifies the notification center that the
operator has resumed location request activities within the affected
location.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 18.17(a), eff. Sept. 1,
1999.

Sec. 251.159. EXCAVATION DAMAGE. (a) If an excavation

operation results in damage to an underground facility, the excavator
shall immediately contact the underground facility operator to report
the damage.
(b) If the excavator is not certain of the operator's identity,
the excavator shall contact a notification center to report the
damage, and the notification center shall immediately notify all
other affected notification centers. Immediately on receiving
notification, each notification center shall contact each member
operator that has underground facilities in or near the area in which
the damage occurred.
(c) Only the operator or a person authorized by the operator
may perform repairs, and the repairs must be made in an expeditious
manner.
(d) An excavator shall delay backfilling in the immediate area
of the damage until the damage is reported to the operator and a
repair schedule is mutually agreed to by the excavator and the
operator.
(e) If damage endangers life, health, or property because of
the presence of flammable material, the excavator shall keep sources
of ignition away.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 18.17(a), eff. Sept. 1,
1999.

SUBCHAPTER E. PENALTIES
Sec. 251.201. CIVIL PENALTY OR WARNING LETTER. (a) An
excavator that violates Section 251.151, 251.152, or 251.159 is
liable for a civil penalty of not less than $500 or more than $1,000.
If a county attorney or district attorney decides not to bring an

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action to recover the civil penalty, the board of directors of the

corporation may, in accordance with Section 251.2011, give the
excavator a warning letter and require the excavator to attend a
safety training course approved by the board. The county attorney or
district attorney shall notify the board of its decision.
(a-1) An excavator that violates Section 251.155(d) is liable
for a civil penalty of not less than $1,000 or more than $2,000. If
a county attorney or district attorney decides not to bring an action
to recover the civil penalty, the board of directors of the
corporation may, in accordance with Section 251.2011, give the
excavator a warning letter and require the excavator to attend a
safety training course approved by the board. The county attorney or
district attorney shall notify the board of its decision.
(b) Except as provided by Subsection (b-1), if it is found at
the trial on a civil penalty that the excavator has violated this
chapter and has been assessed a penalty under this section or has
received a warning letter from the board one other time before the
first anniversary of the date of the most recent violation, the
excavator is liable for a civil penalty of not less than $1,000 or
more than $2,000.
(b-1) If it is found at the trial on a civil penalty that the
excavator has violated Section 251.155(d) and has been assessed a
penalty under this section or has received a warning letter from the
board one other time before the first anniversary of the date of the
most recent violation, the excavator is liable for a civil penalty of
not less than $2,000 or more than $5,000.
(c) Except as provided by Subsection (c-1), if it is found at
the trial on a civil penalty that the excavator has violated this
chapter and has been assessed a penalty under this section at least
two other times before the first anniversary of the date of the most
recent violation, or has been assessed a penalty at least one other
time before the first anniversary of the date of the most recent
violation and has received a warning letter from the board during
that period, the excavator is liable for a civil penalty of not less
than $2,000 or more than $5,000.
(c-1) If it is found at the trial on a civil penalty that the
excavator has violated Section 251.155(d) and has been assessed a
penalty under this section at least two other times before the first
anniversary of the date of the most recent violation, or has been
assessed a penalty at least one other time before the first

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anniversary of the date of the most recent violation and has received
a warning letter from the board during that period, the excavator is
liable for a civil penalty of not less than $5,000 or more than
$10,000.
(d) In assessing the civil penalty the court shall consider the
actual damage to the facility, the effect of the excavator's actions
on the public health and safety, whether the violation was a wilful
act, and any good faith of the excavator in attempting to achieve
compliance.
(e) Venue for a proceeding to collect a civil penalty under
this section is in the county in which:
(1) all or part of the alleged violation occurred;
(2) the defendant has its principal place of business in
this state; or
(3) the defendant resides, if in this state.
(f) The appropriate county attorney or criminal district
attorney shall bring the action to recover the civil penalty.
(g) This section does not apply to a residential property owner
excavating on the property owner's own residential lot.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 18.17(a), eff. Sept. 1,
1999. Amended by Acts 2001, 77th Leg., ch. 652, Sec. 2, eff. Sept.
1, 2001.
Amended by:
Acts 2011, 82nd Leg., R.S., Ch. 184 (S.B. 1217), Sec. 2, eff.
September 1, 2011.

Sec. 251.2011. WARNING LETTER AND SAFETY TRAINING COURSE. (a)

The board of directors of the corporation shall establish a procedure
to ensure that the board verifies that an excavator has violated
Section 251.151, 251.152, or 251.159 before giving the excavator a
warning letter and requiring the excavator to attend a safety
training course under Section 251.201.
(b) The board shall solicit and consider advice and
recommendations from excavators in establishing or approving a safety
training course that an excavator may be required to attend under
Section 251.201.

Added by Acts 2001, 77th Leg., ch. 652, Sec. 3, eff. Sept. 1, 2001.

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Sec. 251.202. ALLOCATION OF CIVIL PENALTY. (a) Fifty percent

of the civil penalty collected under Section 251.201 shall be
transferred to the county treasurer of the county prosecuting the
action and 50 percent of the civil penalty collected under Section
251.201 shall be transferred to the corporation.
(b) The county treasurer shall deposit all money received under
this section in the county road and bridge fund.
(c) The corporation shall use the money received under this
section to develop public service announcements to educate the public
about the statewide one-call notification system and its availability
as prescribed by Section 251.060(7).

Added by Acts 1999, 76th Leg., ch. 62, Sec. 18.17(a), eff. Sept. 1,
1999.

Sec. 251.203. CRIMINAL PENALTY. (a) A person commits an

offense if:
(1) the person without authorization from the owner or
operator of the facility intentionally removes, damages, or conceals
a marker or sign giving information about the location of a Class A
underground facility; and
(2) the marker or sign gives notice of the penalty for
intentional removal, damage, or concealment of the marker or sign.
(a-1) A person commits an offense if the person intentionally
or recklessly violates Section 251.155(d).
(b) An offense under this section is a Class B misdemeanor.

Added by Acts 1999, 76th Leg., ch. 62, Sec. 18.17(a), eff. Sept. 1,
1999.
Amended by:
Acts 2011, 82nd Leg., R.S., Ch. 184 (S.B. 1217), Sec. 3, eff.
September 1, 2011.
Acts 2011, 82nd Leg., R.S., Ch. 184 (S.B. 1217), Sec. 4, eff.
September 1, 2011.

CHAPTER 252. CABLE ATTACHMENTS TO ELECTRIC COOPERATIVE'S DISTRIBUTION

POLES
Sec. 252.001. DEFINITIONS. In this chapter:
(1) "Abandoned pole attachment" means a pole attachment:

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(A) for which a cable operator has not paid, for a

period of 90 consecutive days or more, an invoice for rental charges
presented by an electric cooperative, unless there is a bona fide
dispute over the invoice; or
(B) that is not removed after authority for the pole
attachment has terminated or expired, subject to any extension period
for negotiation and mediation described by Section 252.005(c).
(2) "Cable operator" means an entity that owns or operates
a cable system, as that term is defined by 47 U.S.C. Section 522,
regardless of the nature of the services offered or provided by the
entity in addition to cable services.
(3) "Pole" means a pole carrying distribution lines with a
voltage rating no higher than 34.5 kilovolts.
(4) "Pole attachment" means an affixture of cables,
strands, wires, and associated equipment attached to a pole directly
or indirectly.
(5) "Security instrument" means a performance bond or an
equivalent financial instrument that guarantees payments of amounts
payable to an electric cooperative by a cable operator.

Added by Acts 2013, 83rd Leg., R.S., Ch. 1077 (H.B. 3355), Sec. 1,
eff. September 1, 2013.

Sec. 252.002. APPLICABILITY. (a) This chapter applies to a

pole attachment affixed by a cable operator to a pole owned and
controlled by an electric cooperative. This chapter does not apply
to a pole attachment regulated by the Federal Communications
Commission under 47 U.S.C. Section 224.
(b) This chapter does not abrogate or affect a right or
obligation of a party to a pole attachment contract entered into by a
cable operator and an electric cooperative before September 1, 2013.

Added by Acts 2013, 83rd Leg., R.S., Ch. 1077 (H.B. 3355), Sec. 1,
eff. September 1, 2013.

Sec. 252.003. LIMITATION. (a) This chapter does not

constitute state certification under 47 U.S.C. Section 224(c). If a
court determines that this chapter constitutes certification under
that section, this chapter is not enforceable and has no effect.

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(b) This chapter may not be construed to subject an electric

cooperative to regulation by the Federal Communications Commission
under 47 U.S.C. Section 224. This chapter does not authorize a
department, agency, or political subdivision of the state to exercise
enforcement or regulatory authority over attachments to electric
cooperative poles.

Added by Acts 2013, 83rd Leg., R.S., Ch. 1077 (H.B. 3355), Sec. 1,
eff. September 1, 2013.

Sec. 252.004. CONSTRUCTION. Unless defined by Section 252.001,

the technical terms and phrases in this chapter shall be construed
using their usual and customary meanings in the electric and cable
industries.

Added by Acts 2013, 83rd Leg., R.S., Ch. 1077 (H.B. 3355), Sec. 1,
eff. September 1, 2013.

Sec. 252.005. POLE ATTACHMENT CONTRACTS; ACCESS REQUIREMENTS.

(a) A cable operator and an electric cooperative shall establish the
rates, terms, and conditions for pole attachments, including the
cooperative's application and permitting processes by a written pole
attachment contract executed by both parties. The rates, terms, and
conditions for attachments by a cable operator on an electric
cooperative's poles must be just and reasonable.
(b) A cable operator and an electric cooperative shall
negotiate a pole attachment contract in good faith.
(c) A request to negotiate a new pole attachment contract by a
cable operator or an electric cooperative must be in writing. If a
cable operator and an electric cooperative are unable to agree to a
new pole attachment contract before the expiration date of an
existing pole attachment contract, the rates, terms, and conditions
of the existing pole attachment contract and the terms and conditions
of the electric cooperative's application and permitting processes
remain in force:
(1) during the 180-day negotiation period described by
Subsection (d) and during the period of any agreed extension; and
(2) during the 90-day mediation period described by
Subsection (d) and during the period of any agreed extension.

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(d) If a cable operator and an electric cooperative are unable

to agree to a new pole attachment contract before the 181st day after
the expiration date of the existing pole attachment contract and are
unable to agree to an extension of the negotiation period for a
certain number of days, the cable operator and electric cooperative
shall attempt to resolve any disagreement over the rates, terms, or
conditions by submitting the contract negotiations to mediation. The
mediation process may not extend later than the 90th day after the
end of the 180-day negotiation period and any agreed extension of
that period unless the cable operator and an electric cooperative
agree to an extension of the mediation period for a certain number of
days. The mediation process must be conducted in a county in which
the electric cooperative has distribution poles. The cable operator
and an electric cooperative must share the expenses for the mediator
equally.
(e) If the mediation process does not resolve the disagreement
over the rates, terms, or conditions, the cable operator or the
electric cooperative may request that a court resolve the
disagreement over the rates, terms, and conditions.
(f) Access to a pole may be denied where there is insufficient
capacity and for reasons of safety, reliability, and generally
applicable engineering purposes.
(g) In determining whether rates, terms, and conditions are
just and reasonable, at least the following factors must be
considered:
(1) the interests of and benefits to the consumers and
potential consumers of the electric cooperative's services;
(2) the interests of and benefits to the subscribers and
potential subscribers of the services offered through the pole
attachments;
(3) compliance with applicable safety standards; and
(4) the maintenance and reliability of both electric
distribution and cable services.

Added by Acts 2013, 83rd Leg., R.S., Ch. 1077 (H.B. 3355), Sec. 1,
eff. September 1, 2013.

Sec. 252.006. TRANSFER OF ATTACHMENTS. (a) An electric

cooperative shall provide a cable operator with notice when the

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electric cooperative is installing a new pole to replace an existing

pole to which a pole attachment is affixed due to the rerouting,
maintenance, or upgrading of the electric distribution system. In
the notice, the electric cooperative shall specify a date for the
cable operator to remove its attachment from the existing pole and
transfer the attachment to the new pole.
(b) If a cable operator does not transfer a pole attachment to
the new pole on or before the 30th day after the date specified by
the electric cooperative under Subsection (a), the electric
cooperative may transfer the pole attachment to the new pole at the
cable operator's expense, including the cost for the electric
cooperative to return to the site.
(c) A cable operator shall indemnify, defend, and hold harmless
the electric cooperative and the cooperative's members, directors,
officers, agents, and employees from and against all liability for
the removal and transfer of a pole attachment subject to this
section, except for personal injury or property damage arising from
gross negligence or wilful misconduct of the electric cooperative
during the removal and transfer process.

Added by Acts 2013, 83rd Leg., R.S., Ch. 1077 (H.B. 3355), Sec. 1,
eff. September 1, 2013.

Sec. 252.007. ABANDONED POLE ATTACHMENTS; REMOVAL. (a) A

cable operator shall remove the operator's abandoned pole attachment
from an electric cooperative's pole not later than the 60th day after
the date the cable operator receives from the electric cooperative a
written request for removal of the pole attachment. A cable operator
may request an electric cooperative to extend for a reasonable period
the 60-day period prescribed by this section at any time before the
60-day period expires. The request for an extension must be in
writing. The electric cooperative may grant a cable operator a
reasonable extension of time to remove an abandoned attachment.
(b) If a cable operator does not remove a pole attachment for
which a request for removal was made under Subsection (a) before the
expiration of the period described by that subsection or before the
expiration of an extended period granted by the electric cooperative,
the electric cooperative may remove, use, sell, or dispose of the
pole attachment at the cable operator's expense.

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(c) An electric cooperative may require that a cable operator

post a security instrument in an amount reasonably sufficient to
cover the potential cost to the electric cooperative of removal and
disposal of abandoned pole attachments.
(d) A cable operator shall indemnify, defend, and hold harmless
the electric cooperative and the cooperative's members, directors,
officers, agents, and employees from and against all liability for
the removal, use, sale, or disposal of abandoned pole attachments,
except for personal injury or property damage arising from the gross
negligence or wilful misconduct of the electric cooperative during
the removal and disposal process.

Added by Acts 2013, 83rd Leg., R.S., Ch. 1077 (H.B. 3355), Sec. 1,
eff. September 1, 2013.

Sec. 252.008. EASEMENTS; INDEMNITY. (a) A cable operator is

responsible for obtaining all rights-of-way and easements necessary
for the installation, operation, and maintenance of the operator's
pole attachments.
(b) An electric cooperative is not required to obtain or expand
a right-of-way or easement to accommodate a pole attachment requested
by a cable operator.
(c) An electric cooperative is not liable if a cable operator
is prevented from placing or maintaining a pole attachment because
the cable operator did not obtain a necessary right-of-way or
easement.
(d) A cable operator shall indemnify, defend, and hold harmless
the electric cooperative and the cooperative's members, directors,
officers, agents, and employees from and against any liability
resulting from the cable operator's failure to obtain a necessary
right-of-way or an easement for a pole attachment.

Added by Acts 2013, 83rd Leg., R.S., Ch. 1077 (H.B. 3355), Sec. 1,
eff. September 1, 2013.

CHAPTER 253. BROADBAND ATTACHMENTS TO ELECTRIC COOPERATIVE'S

DISTRIBUTION POLES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 253.0001. DEFINITIONS. In this chapter:

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(1) "Broadband provider" means an entity that provides

broadband service either directly or through an affiliate that uses
the entity's communications facilities, regardless of whether the
entity:
(A) provides additional services in addition to
broadband service; or
(B) uses its facilities in whole or in part to provide
broadband service.
(2) "Broadband service" means Internet service with the
capability of providing:
(A) a download speed of 25 megabits per second or
faster; and
(B) an upload speed of 3 megabits per second or faster.
(3) "Pole" has the meaning assigned by Section 252.001.
(4) "Pole attachment" means an affixture of cables,
strands, wires, and associated equipment used in the provision of a
broadband provider's services attached to a pole directly or
indirectly or placed in a right-of-way owned or controlled by an
electric cooperative.

Added by Acts 2021, 87th Leg., R.S., Ch. 659 (H.B. 1505), Sec. 3, eff.
September 1, 2021.

Sec. 253.0002. APPLICABILITY. This chapter applies to a pole

attachment that is used wholly or partly to provide broadband service
and affixed by a broadband provider to a pole owned and controlled by
an electric cooperative. This chapter does not apply to a pole
attachment regulated by the Federal Communications Commission under
47 U.S.C. Section 224.

Added by Acts 2021, 87th Leg., R.S., Ch. 659 (H.B. 1505), Sec. 3, eff.
September 1, 2021.

Sec. 253.0003. CONSTRUCTION OF CHAPTER. (a) This chapter does

not abrogate or affect a right or obligation of a party to a pole
attachment contract entered into by a broadband provider and an
electric cooperative before September 1, 2021.
(b) This chapter does not limit a right of a party to a pole
attachment contract to request modification, amendment, or renewal of

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such contract to conform it to the provisions of this chapter.

Added by Acts 2021, 87th Leg., R.S., Ch. 659 (H.B. 1505), Sec. 3, eff.
September 1, 2021.

Sec. 253.0004. NO STATE CERTIFICATION; NO REGULATORY AUTHORITY.

(a) This chapter does not constitute state certification under 47
U.S.C. Section 224. If a court determines that this chapter
constitutes certification under that section, this chapter is not
enforceable and has no effect.
(b) This chapter may not be construed to subject an electric
cooperative to regulation by the Federal Communications Commission
under 47 U.S.C. Section 224.
(c) This chapter does not authorize a department, agency, or
political subdivision of this state to exercise enforcement or
regulatory authority over attachments to electric cooperative poles.

Added by Acts 2021, 87th Leg., R.S., Ch. 659 (H.B. 1505), Sec. 3, eff.
September 1, 2021.

Sec. 253.0005. CONSTRUCTION OF TERMS AND PHRASES. Technical

terms and phrases in this chapter, other than those defined by
Section 253.0001, shall be construed using the term's or phrase's
usual and customary meanings in the electric and broadband
industries.

Added by Acts 2021, 87th Leg., R.S., Ch. 659 (H.B. 1505), Sec. 3, eff.
September 1, 2021.

Sec. 253.0006. COST-BASED NONRECURRING CHARGES. Nonrecurring

charges authorized by this chapter must be cost-based.

Added by Acts 2021, 87th Leg., R.S., Ch. 659 (H.B. 1505), Sec. 3, eff.
September 1, 2021.

SUBCHAPTER B. ACCESS TO POLES

Sec. 253.0101. APPLICATION FOR POLE ACCESS. A broadband

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provider may not access a pole owned by an electric cooperative for

the purpose of placing a pole attachment unless the provider applies
for that access.

Added by Acts 2021, 87th Leg., R.S., Ch. 659 (H.B. 1505), Sec. 3, eff.
September 1, 2021.

Sec. 253.0102. USE OF POLE ATTACHMENTS FOR MULTIPLE SERVICES.

A broadband provider that attaches a pole attachment under this
chapter may use the attachment for any service delivered over the
provider's facilities, including cable service.

Added by Acts 2021, 87th Leg., R.S., Ch. 659 (H.B. 1505), Sec. 3, eff.
September 1, 2021.

Sec. 253.0103. NONDISCRIMINATORY ACCESS; MODIFICATION OR

REPLACEMENT TO ACCOMMODATE ATTACHMENT. (a) Except as provided by
this chapter, an electric cooperative shall provide a broadband
provider with nondiscriminatory access to a pole that the cooperative
owns or controls.
(b) Except as provided by Subsection (c), an electric
cooperative may deny a broadband provider access to a pole:
(1) if there is insufficient capacity; or
(2) for reasons of safety, reliability, and generally
applicable engineering purposes.
(c) An electric cooperative may not deny a broadband provider
access to a pole if the basis for denial may be remedied by
rearranging facilities on the pole through reasonable make-ready
activities.
(d) Except as provided by Subsection (e), if a pole must be
replaced to accommodate a new pole attachment applied for by a
broadband provider:
(1) the electric cooperative and broadband provider shall
determine, through good faith negotiations, a reasonable date by
which the pole replacement will occur; and
(2) the broadband provider shall pay the actual costs of
replacing the pole, including the cost to:
(A) remove and dispose of the existing pole;
(B) purchase and install a replacement pole; and

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(C) transfer any existing facilities to the new pole.

(e) An electric cooperative is responsible for the costs of
removing and replacing under Subsection (d) a pole:
(1) with recorded conditions or defects that would
reasonably be expected to endanger human life or property and which
should be promptly corrected; or
(2) that must be replaced for safety or reliability as a
result of normal wear and tear or other natural causes and not on
account of a pole attachment or the action of a broadband provider or
third party.

Added by Acts 2021, 87th Leg., R.S., Ch. 659 (H.B. 1505), Sec. 3, eff.
September 1, 2021.

SUBCHAPTER C. POLE ATTACHMENT CONTRACTS

Sec. 253.0201. CONTRACTS FOR POLE ATTACHMENTS. (a) An
electric cooperative that owns a pole may require a broadband
provider that attaches a pole attachment to the pole under this
chapter to enter into a contract for access to the pole.
(b) The terms and conditions of a contract under Subsection (a)
must be consistent with this chapter.

Added by Acts 2021, 87th Leg., R.S., Ch. 659 (H.B. 1505), Sec. 3, eff.
September 1, 2021.

Sec. 253.0202. RATES, TERMS, AND CONDITIONS FOR POLE

ATTACHMENT. (a) A broadband provider and an electric cooperative
shall establish the rates, terms, and conditions for pole attachments
by a written pole attachment contract executed by both parties.
(b) The rates, terms, and conditions of a contract under this
chapter must:
(1) be just, reasonable, and nondiscriminatory; and
(2) comply with this chapter.
(c) In determining whether rates, terms, and conditions are
just and reasonable, the following factors must be considered:
(1) the interests of and benefits to the consumers and
potential consumers of the electric cooperative's services;
(2) the interests of and benefits to the subscribers and
potential subscribers to broadband services offered through the pole

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attachments;
(3) the interests of and benefits to third parties from the
availability of electric services and broadband services offered
through the pole attachments;
(4) compliance with applicable safety standards; and
(5) the maintenance and reliability of both electric
distribution and broadband services.
(d) A broadband provider and an electric cooperative shall
negotiate a pole attachment contract and any amendment, modification,
or renewal thereof in good faith.
(e) A request to negotiate a new pole attachment contract or to
amend, modify, or renew a contract pertaining to pole attachments by
a broadband provider or an electric cooperative must be made in
writing.

Added by Acts 2021, 87th Leg., R.S., Ch. 659 (H.B. 1505), Sec. 3, eff.
September 1, 2021.

Sec. 253.0203. CONTRACT NEGOTIATIONS AND MEDIATION. (a) If a

broadband provider and an electric cooperative are unable to agree to
a new pole attachment contract before the expiration date of an
existing contract, the rates, terms, and conditions of the existing
contract and the terms and conditions of the electric cooperative's
application and permitting processes remain in force:
(1) during the 90-day negotiation period described by
Subsection (b) and during the period of any agreed extension;
(2) during the 60-day mediation period described by
Subsection (b) and during the period of any agreed extension; and
(3) pending final disposition of any litigation commenced
under Subsection (c).
(b) If a broadband provider and an electric cooperative are
unable to agree to a new pole attachment contract before the 91st day
after the expiration date of an existing contract, and are unable to
agree to an extension of the negotiation period for a certain number
of days, the broadband provider and electric cooperative shall
attempt to resolve any disagreement over the rates, terms, or
conditions by submitting the contract negotiations to a mediation
process. The mediation process may not extend later than the 60th
day after the end of the initial 90-day negotiation period and any

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agreed extension of that period unless the broadband provider and

electric cooperative agree to an extension of the mediation period
for a certain number of days. The mediation process must be
conducted in a county in which the electric cooperative has
distribution poles. The broadband provider and electric cooperative
must share equally the expenses for the mediator.
(c) If the mediation process under Subsection (b) does not
resolve the disagreement over the rates, terms, or conditions of a
new pole attachment agreement, the broadband provider or electric
cooperative may file suit in a district court to resolve the
disagreement or dispute.

Added by Acts 2021, 87th Leg., R.S., Ch. 659 (H.B. 1505), Sec. 3, eff.
September 1, 2021.

SUBCHAPTER D. ADDITIONAL POLE ATTACHMENT REQUIREMENTS

Sec. 253.0401. TRANSFER OF ATTACHMENTS. (a) Before an
electric cooperative installs a new pole to replace an existing pole
due to the rerouting, maintenance, or upgrading of the electric
distribution system, the cooperative shall provide notice of the
replacement to each broadband provider with a pole attachment on the
existing pole.
(b) The notice required under Subsection (a) must specify a
date by which the broadband provider must remove the pole attachment
from the existing pole and transfer the attachment to the new pole.
(c) If a broadband provider does not transfer a pole attachment
to the new pole before the 31st day after the date specified in the
notice, the electric cooperative may transfer the pole attachment to
the new pole at the broadband provider's expense, including the cost
for the electric cooperative to return to the site.
(d) A broadband provider shall indemnify, defend, and hold
harmless an electric cooperative and the cooperative's members,
directors, officers, agents, and employees from and against all
liability for the removal and transfer of a pole attachment subject
to this section, except for personal injury or property damage
arising from the gross negligence or wilful misconduct of the
electric cooperative during the removal and transfer process.

Added by Acts 2021, 87th Leg., R.S., Ch. 659 (H.B. 1505), Sec. 3, eff.
September 1, 2021.

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Sec. 253.0402. ABANDONED POLE ATTACHMENTS; REMOVAL. (a) A

broadband provider that receives a written request from an electric
cooperative to remove an abandoned pole attachment owned by the
provider from a pole owned by the cooperative shall remove the
attachment not later than the 60th day after the date the provider
receives the request.
(b) Before the deadline under Subsection (a), a broadband
provider may request, and an electric cooperative may grant, a
reasonable extension of that deadline. A request for an extension
under this subsection must be in writing.
(c) If a broadband provider does not remove a pole attachment
by the deadline under Subsection (a) or an extended deadline under
Subsection (b), the electric cooperative may remove, use, sell, or
dispose of the pole attachment at the broadband provider's expense.
(d) An electric cooperative may require that a broadband
provider post a security instrument in an amount reasonably
sufficient to cover the potential cost to the electric cooperative of
removal and disposal of abandoned pole attachments.
(e) A broadband provider shall indemnify, defend, and hold
harmless an electric cooperative and the cooperative's members,
directors, officers, agents, and employees from and against all
liability for the removal, use, sale, or disposal of abandoned pole
attachments, except for personal injury or property damage arising
from the gross negligence or wilful misconduct of the electric
cooperative during the removal and disposal process.

Added by Acts 2021, 87th Leg., R.S., Ch. 659 (H.B. 1505), Sec. 3, eff.
September 1, 2021.

Sec. 253.0403. EASEMENTS; INDEMNITY. (a) A broadband provider

is responsible for obtaining all rights-of-way and easements
necessary for the installation, operation, and maintenance of the
provider's pole attachments.
(b) An electric cooperative is not required to obtain or expand
a right-of-way or easement to accommodate a pole attachment requested
by a broadband provider.
(c) An electric cooperative is not liable if a broadband

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 UTILITIES CODE

provider is prevented from placing or maintaining a pole attachment

because the broadband provider did not obtain a necessary right-of-
way or easement.
(d) A broadband provider shall indemnify, defend, and hold
harmless the electric cooperative and the cooperative's members,
directors, officers, agents, and employees from and against any
liability resulting from the broadband provider's failure to obtain a
necessary right-of-way or easement for a pole attachment.

Added by Acts 2021, 87th Leg., R.S., Ch. 659 (H.B. 1505), Sec. 3, eff.
September 1, 2021.

TITLE 6. PRIVATE POWER AGREEMENTS

CHAPTER 301. WIND POWER FACILITY AGREEMENTS
Sec. 301.0001. DEFINITIONS. In this chapter:
(1) "Grantee" means a person who:
(A) leases property from a landowner; and
(B) operates a wind power facility on the property.
(2) "Wind power facility" includes:
(A) a wind turbine generator; and
(B) a facility or equipment used to support the
operation of a wind turbine generator, including an underground or
aboveground electrical transmission or communications line, an
electric transformer, a battery storage facility, an energy storage
facility, telecommunications equipment, a road, a meteorological
tower with wind measurement equipment, or a maintenance yard.
(3) "Wind power facility agreement" means a lease agreement
between a grantee and a landowner that authorizes the grantee to
operate a wind power facility on the leased property.

Added by Acts 2019, 86th Leg., R.S., Ch. 1293 (H.B. 2845), Sec. 1,
eff. September 1, 2019.

Sec. 301.0002. WAIVER VOID; REMEDIES. (a) A provision of a

wind power facility agreement that purports to waive a right or
exempt a grantee from a liability or duty established by this chapter
is void.
(b) A person who is harmed by a violation of this chapter is
entitled to appropriate injunctive relief to prevent further

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violation of this chapter.

(c) The provisions of this section are not exclusive. The
remedies provided in this section are in addition to any other
procedures or remedies provided by other law.

Added by Acts 2019, 86th Leg., R.S., Ch. 1293 (H.B. 2845), Sec. 1,
eff. September 1, 2019.

Sec. 301.0003. REQUIRED AGREEMENT PROVISIONS ON FACILITY

REMOVAL. (a) A wind power facility agreement must provide that the
grantee is responsible for removing the grantee's wind power
facilities from the landowner's property and that the grantee shall,
in accordance with any other applicable laws or regulations, safely:
(1) clear, clean, and remove from the property:
(A) each wind turbine generator, including towers and
pad-mount transformers;
(B) all liquids, greases, or similar substances
contained in a wind turbine generator;
(C) each substation; and
(D) all liquids, greases, or similar substances
contained in a substation;
(2) for each tower foundation and pad-mount transformer
foundation installed in the ground:
(A) clear, clean, and remove the foundation from the
ground to a depth of at least three feet below the surface grade of
the land in which the foundation is installed; and
(B) ensure that each hole or cavity created in the
ground by the removal is filled with topsoil of the same type or a
similar type as the predominant topsoil found on the property;
(3) for each buried cable, including power, fiber-optic,
and communications cables, installed in the ground:
(A) clear, clean, and remove the cable from the ground
to a depth of at least three feet below the surface grade of the land
in which the cable is installed; and
(B) ensure that each hole or cavity created in the
ground by the removal is filled with topsoil of the same type or a
similar type as the predominant topsoil found on the property; and
(4) clear, clean, and remove from the property each
overhead power or communications line installed by the grantee on the

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property.
(b) The agreement must provide that, at the request of the
landowner, the grantee shall:
(1) clear, clean, and remove each road constructed by the
grantee on the property; and
(2) ensure that each hole or cavity created in the ground
by the removal is filled with topsoil of the same type or a similar
type as the predominant topsoil found on the property.
(c) The agreement must provide that, at the request of the
landowner, if reasonable, the grantee shall:
(1) remove from the property all rocks over 12 inches in
diameter excavated during the decommissioning or removal process;
(2) return the property to a tillable state using
scarification, V-rip, or disc methods, as appropriate; and
(3) ensure that:
(A) each hole or cavity created in the ground by the
removal is filled with topsoil of the same type or a similar type as
the predominant topsoil found on the property; and
(B) the surface is returned as near as reasonably
possible to the same condition as before the grantee dug holes or
cavities, including by reseeding pastureland with native grasses
prescribed by an appropriate governmental agency, if any.
(d) The landowner shall make a request under Subsection (b) or
(c) not later than the 180th day after the later of:
(1) the date on which the wind power facility is no longer
capable of generating electricity in commercial quantities; or
(2) the date the landowner receives written notice of
intent to decommission the wind power facility from the grantee.

Added by Acts 2019, 86th Leg., R.S., Ch. 1293 (H.B. 2845), Sec. 1,
eff. September 1, 2019.

Sec. 301.0004. REQUIRED AGREEMENT PROVISIONS ON FINANCIAL

ASSURANCE. (a) A wind power facility agreement must provide that
the grantee shall obtain and deliver to the landowner evidence of
financial assurance that conforms to the requirements of this section
to secure the performance of the grantee's obligation to remove the
grantee's wind power facilities located on the landowner's property
as described by Section 301.0003. Acceptable forms of financial

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 UTILITIES CODE

assurance include a parent company guaranty with a minimum investment

grade credit rating for the parent company issued by a major domestic
credit rating agency, a letter of credit, a bond, or another form of
financial assurance acceptable to the landowner.
(b) The amount of the financial assurance must be at least
equal to the estimated amount by which the cost of removing the wind
power facilities from the landowner's property and restoring the
property to as near as reasonably possible the condition of the
property as of the date the agreement begins exceeds the salvage
value of the wind power facilities, less any portion of the value of
the wind power facilities pledged to secure outstanding debt.
(c) The agreement must provide that:
(1) the estimated cost of removing the wind power
facilities from the landowner's property and restoring the property
to as near as reasonably possible the condition of the property as of
the date the agreement begins and the estimated salvage value of the
wind power facilities must be determined by an independent, third-
party professional engineer licensed in this state;
(2) the grantee must deliver to the landowner an updated
estimate, prepared by an independent, third-party professional
engineer licensed in this state, of the cost of removal and the
salvage value at least once every five years for the remainder of the
term of the agreement; and
(3) the grantee is responsible for ensuring that the amount
of the financial assurance remains sufficient to cover the amount
required by Subsection (b), consistent with the estimates required by
this subsection.
(d) The grantee is responsible for the costs of obtaining
financial assurance described by this section and costs of
determining the estimated removal costs and salvage value.
(e) The agreement must provide that the grantee shall deliver
the financial assurance not later than the earlier of:
(1) the date the wind power facility agreement is
terminated; or
(2) the 10th anniversary of the commercial operations date
of the wind power facilities located on the landowner's leased
property.
(f) For purposes of this section, "commercial operations date"
means the date on which the wind power facilities are approved for
participation in market operations by a regional transmission

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organization and does not include the generation of electrical energy

or other operations conducted before that date for purposes of
maintenance and testing.
(g) The grantee may not cancel financial assurance before the
date the grantee has completed the grantee's obligation to remove the
grantee's wind power facilities located on the landowner's property
in the manner provided by this chapter, unless the grantee provides
the landowner with replacement financial assurance at the time of or
before the cancellation. In the event of a transfer of ownership of
the grantee's wind power facilities, the financial security provided
by the grantee shall remain in place until the date evidence of
financial security meeting the requirements of this chapter is
provided to the landowner.

Added by Acts 2019, 86th Leg., R.S., Ch. 1293 (H.B. 2845), Sec. 1,
eff. September 1, 2019.

CHAPTER 302. SOLAR POWER FACILITY AGREEMENTS

Sec. 302.0001. DEFINITIONS. In this chapter:
(1) "Grantee" means a person, other than an electric
utility, as defined by Section 31.002, who:
(A) leases property from a landowner; and
(B) operates a solar power facility on the property.
(2) "Solar energy device" has the meaning assigned by
Section 185.001.
(3) "Solar power facility" includes:
(A) a solar energy device; and
(B) a facility or equipment, other than a facility or
equipment owned by an electric utility, as defined by Section 31.002,
used to support the operation of a solar energy device, including an
underground or aboveground electrical transmission or communications
line, an electric transformer, a battery storage facility, an energy
storage facility, telecommunications equipment, a road, a
meteorological tower, or a maintenance yard.
(4) "Solar power facility agreement" means a lease
agreement between a grantee and a landowner that authorizes the
grantee to operate a solar power facility on the leased property.

Added by Acts 2021, 87th Leg., R.S., Ch. 582 (S.B. 760), Sec. 2, eff.
September 1, 2021.

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Sec. 302.0002. APPLICABILITY. This chapter applies only to a

solar power facility that is a generation asset as defined by Section
39.251.

Added by Acts 2021, 87th Leg., R.S., Ch. 582 (S.B. 760), Sec. 2, eff.
September 1, 2021.

Sec. 302.0003. WAIVER VOID; REMEDIES. (a) A provision of a

solar power facility agreement that purports to waive a right or
exempt a grantee from a liability or duty established by this chapter
is void.
(b) A person who is harmed by a violation of this chapter is
entitled to appropriate injunctive relief to prevent further
violation of this chapter.
(c) The provisions of this section are not exclusive. The
remedies provided in this section are in addition to any other
procedures or remedies provided by other law.

Added by Acts 2021, 87th Leg., R.S., Ch. 582 (S.B. 760), Sec. 2, eff.
September 1, 2021.

Sec. 302.0004. REQUIRED AGREEMENT PROVISIONS ON FACILITY

REMOVAL. (a) A solar power facility agreement must provide that the
grantee is responsible for removing the grantee's solar power
facilities from the landowner's property and that the grantee shall,
in accordance with any other applicable laws or regulations, safely:
(1) clear, clean, and remove from the property each solar
energy device, transformer, and substation;
(2) for each foundation of a solar energy device,
transformer, or substation installed in the ground:
(A) clear, clean, and remove the foundation from the
ground to a depth of at least three feet below the surface grade of
the land in which the foundation is installed; and
(B) ensure that each hole or cavity created in the
ground by the removal is filled with soil of the same type or a
similar type as the predominant soil found on the property;
(3) for each buried cable, including power, fiber-optic,

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and communications cables, installed in the ground:

(A) clear, clean, and remove the cable from the ground
to a depth of at least three feet below the surface grade of the land
in which the cable is installed; and
(B) ensure that each hole or cavity created in the
ground by the removal is filled with soil of the same type or a
similar type as the predominant soil found on the property; and
(4) clear, clean, and remove from the property each
overhead power or communications line installed by the grantee on the
property.
(b) The agreement must provide that, at the request of the
landowner, the grantee shall:
(1) clear, clean, and remove each road constructed by the
grantee on the property; and
(2) ensure that each hole or cavity created in the ground
by the removal is filled with soil of the same type or a similar type
as the predominant soil found on the property.
(c) The agreement must provide that, at the request of the
landowner, if reasonable, the grantee shall:
(1) remove from the property all rocks over 12 inches in
diameter excavated during the decommissioning or removal process;
(2) return the property to a tillable state using
scarification, V-rip, or disc methods, as appropriate; and
(3) ensure that:
(A) each hole or cavity created in the ground by the
removal is filled with soil of the same type or a similar type as the
predominant soil found on the property; and
(B) the surface is returned as near as reasonably
possible to the same condition as before the grantee dug holes or
cavities, including by reseeding pastureland with native grasses
prescribed by an appropriate governmental agency, if any.
(d) The landowner shall make a request under Subsection (b) or
(c) not later than the 180th day after the later of:
(1) the date on which the solar power facility is no longer
capable of generating electricity in commercial quantities; or
(2) the date the landowner receives written notice of
intent to decommission the solar power facility from the grantee.

Added by Acts 2021, 87th Leg., R.S., Ch. 582 (S.B. 760), Sec. 2, eff.
September 1, 2021.

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Sec. 302.0005. REQUIRED AGREEMENT PROVISIONS ON FINANCIAL

ASSURANCE. (a) A solar power facility agreement must provide that
the grantee shall obtain and deliver to the landowner evidence of
financial assurance that conforms to the requirements of this section
to secure the performance of the grantee's obligation to remove the
grantee's solar power facilities located on the landowner's property
as described by Section 302.0004. Acceptable forms of financial
assurance include a parent company guaranty with a minimum investment
grade credit rating for the parent company issued by a major domestic
credit rating agency, a letter of credit, a bond, or another form of
financial assurance reasonably acceptable to the landowner.
(b) The amount of the financial assurance must be at least
equal to the estimated amount by which the cost of removing the solar
power facilities from the landowner's property and restoring the
property to as near as reasonably possible the condition of the
property as of the date the agreement begins exceeds the salvage
value of the solar power facilities, less any portion of the value of
the solar power facilities pledged to secure outstanding debt.
(c) The agreement must provide that:
(1) the estimated cost of removing the solar power
facilities from the landowner's property and restoring the property
to as near as reasonably possible the condition of the property as of
the date the agreement begins and the estimated salvage value of the
solar power facilities must be determined by an independent, third-
party professional engineer licensed in this state;
(2) the grantee must deliver to the landowner an updated
estimate, prepared by an independent, third-party professional
engineer licensed in this state, of the cost of removal and the
salvage value:
(A) on or before the 10th anniversary of the commercial
operations date of the solar power facilities; and
(B) at least once every five years after the commercial
operations date of the solar power facilities for the remainder of
the term of the agreement; and
(3) the grantee is responsible for ensuring that the amount
of the financial assurance remains sufficient to cover the amount
required by Subsection (b), consistent with the estimates required by
this subsection.

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(d) The grantee is responsible for the costs of obtaining

financial assurance described by this section and costs of
determining the estimated removal costs and salvage value.
(e) The agreement must provide that the grantee shall deliver
the financial assurance not later than the earlier of:
(1) the date the solar power facility agreement is
terminated; or
(2) the 20th anniversary of the commercial operations date
of the solar power facilities located on the landowner's leased
property.
(f) For purposes of this section, "commercial operations date"
means the date on which the solar power facilities are approved for
participation in market operations by a regional transmission
organization and does not include the generation of electrical energy
or other operations conducted before that date for purposes of
maintenance and testing.
(g) The grantee may not cancel financial assurance before the
date the grantee has completed the grantee's obligation to remove the
grantee's solar power facilities located on the landowner's property
in the manner provided by this chapter, unless the grantee provides
the landowner with replacement financial assurance at the time of or
before the cancellation. In the event of a transfer of ownership of
the grantee's solar power facilities, the financial security provided
by the grantee shall remain in place until the date evidence of
financial security meeting the requirements of this chapter is
provided to the landowner.

Added by Acts 2021, 87th Leg., R.S., Ch. 582 (S.B. 760), Sec. 2, eff.
September 1, 2021.

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