H.B. No. 1510         AN ACT   relating to the response and resilience of certain electricity   service providers to major weather-related events or other natural   disasters; granting authority to issue bonds.          BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:          SECTION 1.  Section 36.402(a), Utilities Code, is amended to   read as follows:          (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 be incurred, by the electric utility, but such estimates   shall be subject to true-up and reconciliation after the actual   costs are known.          SECTION 2.  Chapter 36, Utilities Code, is amended by adding   Subchapter J to read as follows:   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.          (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.          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 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.          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.          (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.          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.          (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, 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.           Sec. 36.455.  COMMISSION REGULATION OF CORPORATION. The   commission shall regulate the corporation as provided by this   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.          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                             (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.          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.          SECTION 3.  Section 37.056(c), Utilities Code, is amended to   read as follows:          (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)  to the extent applicable, the effect of   granting the certificate on the ability of this state to meet the   goal established by Section 39.904(a) of this title.          SECTION 4.  Section 37.058, Utilities Code, is amended by   adding Subsection (e) to read as follows:          (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.          SECTION 5.  This Act takes effect immediately if it receives   a vote of two-thirds of all the members elected to each house, as   provided by Section 39, Article III, Texas Constitution. If this   Act does not receive the vote necessary for immediate effect, this   Act takes effect September 1, 2021.       ______________________________ ______________________________      President of the Senate Speaker of the House                   I certify that H.B. No. 1510 was passed by the House on April   20, 2021, by the following vote:  Yeas 145, Nays 0, 1 present, not   voting.     ______________________________   Chief Clerk of the House                 I certify that H.B. No. 1510 was passed by the Senate on May   19, 2021, by the following vote:  Yeas 31, Nays 0.     ______________________________   Secretary of the Senate       APPROVED:  _____________________                      Date                           _____________________                    Governor