By: Paddie H.B. No. 1520       A BILL TO BE ENTITLED   AN ACT   relating to the recovery and securitization of extraordinary costs   incurred by certain gas utilities; authority to issue bonds.          BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:          SECTION 1.  Chapter 1232.002, Government Code, is amended by   adding a new (3) to read as follows:          Sec. 1232.002.  PURPOSE. The purpose of this chapter is to   provide a method of financing for:                (1)  the acquisition or construction of buildings;                (2)  the purchase or lease of equipment by executive or   judicial branch state agencies; and                (3)  customer rate relief bonds authorized by the   Railroad Commission of Texas.          SECTION 2.  Chapter 1232.06(a), Government Code is amended   by adding (4) to read as follows:          Sec. 1232.06.  BOARD AUTHORITY. Sec. 1232.066. BOARD   AUTHORITY. (a) The board's authority under this chapter is limited   to the financing of:                (1)  the acquisition or construction of a building;                (2)  the purchase or lease of equipment;                (3)  stranded costs of a municipal power agency; or                (4)  customer rate relief bonds approved by the   railroad commission.          SECTION 3.  Chapter 1232, Government Code is amended to add a   new section to read as follows:          Sec. 1232.1072.  ISSUANCE OF OBLIGATIONS FOR CUSTOMER RATE   RELIEF BONDS APPROVED BY THE RAILROAD COMMISSION OF TEXAS. (a) The   authority may, either directly or by means of a trust or trusts   established by it, issue obligations or other evidences of   indebtedness for financing customer rate relief bonds approved by   the Railroad Commission of Texas pursuant to Chapter 104, Utilities   Code.          (b)  At the request of the Railroad Commission of Texas, the   authority shall issue obligations or other evidences of   indebtedness in the amount of the requested customer rate relief   bonds, plus the issuance costs, and shall make a grant of the   proceeds of the obligations or evidences of indebtedness to the   Railroad Commission of Texas. The Railroad Commission of Texas'   request under this subsection must include a statement of the   payment terms for recovering customer rate relief costs.          (c)  Obligations or evidences of indebtedness issued by the   authority under this section must be created pursuant to financing   orders issued by the Railroad Commission of Texas. Such financing   orders shall authorize the authority to create isolated bankruptcy   remote financing entities to hold customer rate relief property,   and the establishment of such financing entities is hereby   authorized.          (d)  Obligations or evidences of indebtedness issued by the   authority under this section shall also include administrative   costs related to each approved customer rate relief financing, as   part of the financing costs of each financing.          (e)  Obligations or evidences of indebtedness issued by the   authority under this section must be secured by CRR property, as   defined in Section 104.361 (10), Utilities Code, and non-bypassable   CRR charges, as defined in Section 104.361 (9), Utilities Code,   imposed by the authority on customers receiving natural gas   services provided by the requesting gas utility, which must be   consistent with the customer rate relief recovery terms stated in   the gas utility's request unless otherwise approved by the Railroad   Commission of Texas. Obligations or evidences of indebtedness   issued by the authority under this section are not a debt of this   state, the Railroad Commission of Texas, or any gas utility.          (f)  The Railroad Commission of Texas shall provide   necessary assistance to the authority to ensure the collection and   enforcement of the non-bypassable charges, either directly or by   using the assistance and powers of the requesting gas utility as   servicer.                (1)  The authority and the Railroad Commission of Texas   have all the powers necessary to perform the duties and   responsibilities described by this section. This section shall be   interpreted broadly in a manner consistent with the most   cost-effective financing of customer rate relief related costs.   Obligations or evidences of indebtedness issued by the authority   under this section may be structured so that any interest on the   obligations or evidences of indebtedness is excluded from gross   income for federal income tax purposes. Any interest on the   obligations or evidences of indebtedness is not subject to taxation   by and shall not be included as part of the measurement of a tax by   this state or a political subdivision of this state.                (2)  The authority shall make periodic reports to the   Railroad Commission of Texas and the public regarding each   financing.          SECTION 4.  Chapter 1232.018, Government Code is amended to   read as follows:          Sec. 1232.108.  LEGISLATIVE AUTHORIZATION REQUIRED. Except   as permitted by Section 1232.109, 1232.1072, 2166.452, 1232.1072 or   2166.453, before the board may issue and sell bonds, the   legislature by the General Appropriations Act or other law must   have authorized:                (1)  the specific project for which the bonds are to be   issued and sold; and                (2)  the estimated cost of the project or the maximum   amount of bonded indebtedness that may be incurred by the issuance   and sale of bonds for the project.          SECTION 5.  Chapter 104, Utilities Code, is amended by   adding subchapter I to read as follows:   SUBCHAPTER I. CUSTOMER RATE RELIEF BONDS          Sec. 104.360.  PURPOSE. The purpose of this subchapter is to   reduce the cost that customers would otherwise experience due to   the extraordinary costs that gas utilities incurred and may incur   to secure gas supply and provide service during natural and   man-made disasters, system failures, and other catastrophic events   and to restore gas utility systems after such events by providing   securitization financing enabling gas utilities to recover these   costs. This financing mechanism will provide rate relief to   customers by extending the timeframe over which the extraordinary   costs are recovered from customers and support the financial   strength and stability of gas utility companies. The commission   shall determine that securitization provides tangible and   quantifiable benefits to customers, greater than would have been   achieved absent the issuance of the CRR bonds, as defined herein.   The commission shall determine that the structuring and pricing of   the CRR bonds result in CRR bond charges consistent with the terms   of the applicable financing order and market conditions at the time   of the pricing of the CRR bonds. The proceeds of the CRR bonds shall   be used solely for the purpose of reducing the amount of the   regulatory asset determined by the commission to be reasonable and   other purposes provided herein.          SECTION 6.  Chapter 104, Utilities Code, is amended by   adding Section 104.361 to read as follows:          Sec. 104.361.  DEFINITIONS. In this subchapter:                (1)  "Ancillary agreement" means any bond, insurance   policy, letter of credit, reserve account, surety bond, interest   rate or currency swap arrangement, interest rate lock agreement,   forward payment conversion agreement, or other hedging   arrangement, liquidity or credit support arrangement, or other   financial arrangement entered into in connection with the issuance   or payment of CRR bonds that enhances the marketability, security,   or creditworthiness of CRR bonds.                (2)  "Assignee" means any legally recognized entity to   which an interest in CRR property is transferred, other than as   security. The term includes a corporation, limited liability   company, public authority, trust, general partnership or limited   partnership, or other financing entity, including any assignee of   that party.                (3)  "Authority" means the Texas Public Finance   Authority, as the sponsoring issuer of CRR bonds.                (4)  "Bond administrative expenses" means expenses   incurred to administer CRR bonds issued under this subchapter,   including fees for paying agents, trustees, and attorneys, and for   other professional services necessary to ensure compliance with   applicable state or federal law.                (5)  "Bond obligations" means the principal of a CRR   bond and any premium and interest on a CRR bond issued under this   subchapter, together with any amount owed under a related ancillary   agreement or credit agreement                (6)  "Commission" means the Railroad Commission of   Texas.                (7)  "Credit agreement" means a loan agreement, a   revolving credit agreement, an agreement establishing a line of   credit, or any similar financing arrangement.                (8)  "CRR bonds" means bonds, notes, certificates, or   other evidences of indebtedness or ownership that are issued by an   assignee pursuant to an financing order, the proceeds of which are   used directly or indirectly to recover, finance or refinance   railroad commission-approved regulatory assets, including   extraordinary costs, and related financing costs, and that are   payable from and secured by CRR property and amounts on deposit in   the obligation trust fund to the extent provided by the applicable   financing order.                (9)  "CRR charges" means the amounts authorized by the   commission to repay, finance, or refinance regulatory assets,   including extraordinary costs, financing costs, and other costs   authorized by the financing order and that are non-bypassable   charges:                      (a)  imposed on and part of customer bills of a gas   utility who has received a regulatory asset determination under   Section 104.363;                      (b)  collected by a gas utility who has received a   regulatory asset determination under Section 104.363, or its   successors or assignees, or a collection agent, as servicer, in   full, 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 104.363 or its successors or   assignees, even if a customer elects to purchase gas from an   alternative gas supplier.          Such charges shall continue to be paid until all CRR bonds and   financing costs are paid in full. CRR charges shall be designed as   uniform volumetric charges applicable to all existing or future   customers receiving service from a gas utility that has received a   regulatory asset determination under Section 104.363.                (10)  "CRR property" means the property described in   Section 104.365.                (11)  "Extraordinary costs" means:                      (A)  Reasonable and necessary costs placed in a   regulatory asset as defined in subpart (16) and approved by the   commission in a regulatory asset determination pursuant to section   104.363. Extraordinary costs eligible for inclusion in a regulatory   asset may include costs incurred to serve customers, including   capital costs and other costs expensed, charged to self-insurance   reserves, deferred, capitalized, or otherwise financed, that are   incurred by a gas utility or on behalf of the gas utility for gas   procurement, supply and system restoration and infrastructure,   operations and administration in response to any tropical storm or   hurricane, ice or snow storm, flood, or other weather-related   event, other natural or man-made disaster, system failure, or other   catastrophic event.                      (B)  Extraordinary costs may include natural gas   procurement costs above normalized market pricing, mobilization,   staging, construction, reconstruction, replacement, or repair of   system facilities. Extraordinary costs may include reasonable   estimates of the costs of natural gas procurement above normalized   market pricing and any activity or activities conducted or expected   to be conducted by or on behalf of the gas utility in connection   with the restoration of service or infrastructure associated with   natural gas outages, and such estimates may be subject to   reconciliation after the actual costs are known but before the   commission makes a determination as to the utility's regulatory   asset in accordance with Section 104.363.                      (C)  Extraordinary costs may include:                            (i)  a carrying charge interest rate at the   gas utility's cost of long-term debt as last approved by the   commission in a general rate proceeding if the final order (which   may be an order on rehearing) approving the cost of long-term debt   was filed less than three years before the application for   regulatory asset recovery was filed;                            (ii)  if the final order approving the gas   utility's cost of long-term debt is not stated in a final order   meeting the requirements of subsection (c)(i) or the final order   was filed three or more years before the application for regulatory   asset recovery was filed an alternative cost of long-term debt   shall be used that reflects the average cost of long-term debt   established by the commission for all gas utilities based on final   orders issued in the most recent three-year period preceding the   filing of the application for regulatory asset recovery; or                            (iii)  the carrying charge interest rate set   at the applicable cost of long-term debt set forth in subsection   (c)(i-ii) shall be applied from the date on which the extraordinary   costs were incurred until the date that CRR bonds are issued or   until extraordinary costs are otherwise recovered by the gas   utility pursuant to the provisions of this section.          Extraordinary costs include any costs of acquiring,   retiring, and refunding the gas utility's existing debt and equity   securities or credit facilities in connection with the issuance of   CRR bonds.                (12)  "Financing costs" means any of the following:                      (A)  interest and acquisition, defeasance, or   redemption premiums that are payable on CRR bonds.                      (B)  any payment required under an ancillary   agreement and any amount required to fund or replenish reserve or   other accounts established under the terms of any indenture,   ancillary agreement, or other financing documents pertaining to CRR   bonds.                      (C)  issuance costs, and any ongoing costs related   to supporting, repaying, servicing, and refunding CRR bonds,   including but not limited to servicing fees, accounting and   auditing fees, trustee fees, legal fees and expenses, consulting   fees, administrative fees, printing fees, financial advisor fees   and expenses, SEC registration fees, issuer fees, placement and   underwriting fees, capitalized interest, overcollateralization   funding requirements, rating agency fees, stock exchange listing   and compliance fees, filing fees, and any other bond administration   expenses. The term includes the costs to the commission of   acquiring professional services for the purpose of evaluating   extraordinary costs under this subchapter.                (13)  "Financing order" means an order of the   commission adopted under Section 104.364 approving the issuance of   CRR bonds and the creation of CRR property and associated CRR   charges for the recovery of regulatory assets, including   extraordinary costs, and related financing costs, and other costs   authorized by such financing order.                (14)  "Financing party" means a holder of CRR bonds,   including trustees, collateral agents, any party under an ancillary   agreement and other persons acting for the benefit of the holder.                (15)  "Gas utility" shall mean:                      (A)  An operator of natural gas distribution   pipelines that delivers and sells natural gas to the public and that   is subject to the commission's jurisdiction under Section 102.001   of this title; and                      (B)  a gas utility that transmits, transports,   delivers, or sells natural gas or synthetic natural gas to   operators of natural gas distribution pipelines and whose rates for   such services are established by the commission in a cost of service   rate proceeding filed pursuant to Chapter 104 of this title.                (16)  "Non-bypassable" shall mean a charge that may not   be offset by any credit.                (17)  "Normalized market pricing" shall be determined   using the average monthly pricing at the Henry Hub for the three (3)   preceding months prior to the month during which extraordinary   costs were incurred, plus contractual adders to the index price,   and other non-indexed gas procurement costs.                (18)  "Regulatory asset" includes the extraordinary   costs recorded by the gas utility in its 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 (FERC USOA) and Generally Accepted Accounting Principles (GAAP)   or classified as a receivable or financial asset under   International Financial Reporting Standards (IFRS) pursuant to the   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 on issued on   February 13, 2021, or any notice or order issued by the commission   thereafter for other similarly authorized natural or man-made   disasters or system failure events.          SECTION 7.  Chapter 104, Utilities Code, is amended by   adding Section 104.361 to read as follows:          Sec. 104.361.  JURISDICTION AND POWERS OF THE COMMISSION AND   OTHER REGULATORY AUTHORITIES. (a) The commission may authorize   the issuance of CRR bonds if the commission finds pursuant to   Section 104.363 that the proposed structuring, expected pricing,   and proposed financing costs of the CRR bonds are reasonably   expected to provide benefits to customers comparing the net present   value of the costs to customers resulting from the issuance of CRR   bonds and the costs that would result from the application of   conventional methods of financing or recovering gas utility   extraordinary costs and other costs authorized by a financing   order.          (b)  The commission may assess to a gas utility costs   associated with administering this subchapter and such assessments   shall be recovered from rate-regulated customers as part of gas   cost.          (c)  The commission has exclusive, original jurisdiction to   issue financing orders that authorize the creation of CRR property,   CRR charges to service CRR bonds and financing costs. CRR charges,   if authorized by the commission through a financing order in its   sole discretion, will be imposed pursuant to CRR property, and not   by a gas utility.          (d)  Except as provided by (c), this subchapter does not in   any way 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 of this subtitle.          SECTION 8.  Chapter 104, Utilities Code, is amended by   adding Section 104.362 to read as follows:          Sec. 104.362.  REGULATORY ASSET DETERMINATION. (a) The   commission shall, upon application of a gas utility to recover a   regulatory asset, determine the regulatory asset amount to be   recovered by the gas utility.          (b)  A gas utility desiring to participate in the CRR bond   process pursuant to a financing order shall file an application   with the commission no later than 90 days following the conclusion   of the event for which regulatory asset recovery is requested or no   later than 60 days following the effective date of this   subchapter's passage. The application date deadline shall be   determined by the commission consistent with this subpart.          (c)  If the commission does not make a final determination   concerning the regulatory asset amount to be recovered by the gas   utility not later than 90 days of an application filed under (a),   the commission is considered to have approved the regulatory asset   amount requested by the gas utility.          (d)  The regulatory asset determination shall not otherwise   be subject to reduction, impairment, or adjustment by further   action of the commission, except as permitted by Section 104.368.          (e)  The regulatory asset determination is not subject to   rehearing by the commission. A regulatory asset determination may   only be appealed to a Travis County district court by a party to the   proceeding filed not later than 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 not later   than 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 subchapter.          (f)  The commission shall issue an order to establish a   schedule, filing requirements, and procedure for determining the   prudence of the costs included in a gas utility's regulatory asset.          (g)  To extent a gas utility subject to this subchapter   receives insurance proceeds, governmental grants, or any other   sources of funding that compensates or otherwise reimburses or   indemnifies it for extraordinary costs following the issuance of   CRR bonds a gas utility may record the amount in a regulatory   liability account and such amounts will be reviewed in a future   proceeding. If any audit conducted under a valid gas purchase   agreement identifies a change to the total amount of greater than 5%   of the gas supply costs incurred during the extraordinary event set   forth in Section 104.361(10)(A) is identified, the gas utility may   record the amount in a regulatory asset or regulatory liability   account and such amounts will be reviewed for recovery in a future   proceeding.          SECTION 7.  Chapter 104, Utilities Code, is amended by   adding Section 104.363 to read as follows:          Sec. 104.363.  FINANCING ORDERS AND ISSUANCE OF CRR BONDS BY   OR ON BEHALF OF THE AUTHORITY. (a) If the commission determines   that CRR bond financing for extraordinary costs is the most   cost-effective method of funding several regulatory asset   reimbursements to be made to gas utilities, the commission may,   following the final resolution of all applications filed under   Section 104.363, request the authority to issue CRR bonds on its   behalf. Before making a request of the authority under this   section, the commission must issue a financing order that complies   with the provisions of this Section 104.363.          (b)  The financing order shall include a finding that the use   of the securitization financing mechanism is in the public interest   and that the financing order is consistent with the standards set   forth in Section 104.360.          (c)  The financing order shall detail the total amount of the   regulatory asset determinations to be included in the CRR bond   issuance.          (d)  The financing order shall authorize the recovery of any   tax obligation of the gas utilities arising or resulting from its   receipt of CRR bond proceeds, or from the collection or remittance   of CRR charges through the gas utilities' gas cost recovery   mechanism or other means determined by the commission to be   reasonable.          (e)  The financing order shall authorize the authority's   issuance of CRR bonds through one or more legally isolated   bankruptcy remote financing entities established by the authority.          (f)  The financing order shall include a statement of the   aggregated regulatory asset determination to be included in the   principal amount of the CRR bonds, not to exceed $10 billion for any   separate bond issue, and the maximum scheduled final maturity of   the CRR bonds may not exceed 30 years, however the legal final   maturity may be longer, based upon rating agency and market   considerations.          (g)  The financing order shall provide for the imposition and   mandatory periodic formulaic adjustment of CRR charges in   accordance with Section 104.368 and the collection thereof by all   gas utilities for whom a regulatory asset determination has been   made pursuant to Section 104.363 to guarantee that the bonds will be   paid in full.          (h)  The financing order shall authorize the creation of CRR   property in favor of the authority and the authority's transfer   thereof.          (i)  The financing order shall direct the authority to   disperse the proceeds of CRR bonds to gas utilities for which a   regulatory asset determination has been made under Section 104.363   and the amounts to be distributed.          (j)  The principal amount determined by the commission under   subsection (c) may be increased to include an amount sufficient to:                (1)  pay the financing costs for such issuance;                (2)  reimburse the authority for any costs incurred for   the issuance;                (3)  provide a bond reserve fund; and                (4)  capitalize interest for the period determined   necessary by the commission.          (k)  The authority, consistent with this subchapter and the   terms of the financing order, shall issue CRR bonds on request by   the commission, in accordance with the requirements of Chapter   1232, Government Code, as amended by this subchapter and other   provisions of Title 9, Government Code, that apply to bond issuance   by a state agency.          (l)  The authority, consistent with this subchapter and the   terms of the financing order, shall determine the method of sale,   type of bond, bond form, maximum interest rates, and other terms of   the CRR bonds that, in the authority's judgment, best achieve the   economic goals of the financing order and effect the financings at   the lowest practicable cost.          (m)  The authority shall establish legally isolated   bankruptcy remote financing entities and may enter into credit   agreements or ancillary agreements in connection with the issuance   of CRR bonds.          (n)  The financing order shall provide that CRR charges shall   be collected and allocated among customers of each utility for whom   a regulatory determination has been made under Section 104.363   through uniform, monthly volumetric charges to be paid by customers   as a component of the gas utility's gas cost or in such other manner   as determined by the commission to be reasonable.          (o)  The financing order shall reflect the commitment made by   each gas utility receiving proceeds therefrom that such proceeds   shall be in lieu of recovery of these costs through the regular   rate-making process or other mechanism to the extent such costs are   reimbursed to the gas utility by CRR bond financing proceeds.          (p)  The financing order shall become effective in   accordance with its terms, and the financing order, together with   the CRR property and the CRR charges authorized by the financing   order, shall thereafter be irrevocable and not subject to   reduction, impairment, or adjustment by further action of the   commission, except as provided under subpart (r) and permitted by   Section 104.368.          (q)  The commission shall issue a financing order under this   Section not later than 90 days following the conclusion of all   proceedings filed under Section 104.363.          (r)  A financing order is not subject to rehearing by the   commission. A financing order may only be appealed 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   subchapter.          (s)  The authority shall issue CRR bonds within 45 days of   the receipt of a financing order issued pursuant to this section.     The authority shall deliver CRR bond proceeds net of upfront   financing costs to each gas utility sufficient to reimburse the gas   utility the regulatory asset amount determined to be reasonable   under Section 104.363 within 15 days of issuance of the CRR bonds.   For the weather event that took place in February 2021, the   authority shall deliver CRR bond proceeds net of upfront financing   costs to each gas utility no later than December 31, 2021.          SECTION 8.  Chapter 104, Utilities Code, is amended by   adding Section 104.364 to read as follows:          Sec. 104.364.  PROPERTY RIGHTS. (a) The CRR bonds will be   solely the obligation of the assignee or issuing financing entity   and will not be a debt of a gas utility or a debt or a pledge of the   faith and credit of the state or any political or governmental unit   thereof.          (b)  The CRR bonds shall be nonrecourse to the credit or any   assets of the state and the authority.          (c)  The rights and interests of the authority or successor   under a financing order, including the right to impose and receive   CRR charges authorized in the financing order, shall be only   contract rights until they are first transferred to an assignee or   pledged in connection with the issuance of the CRR bonds, at which   time they will become "CRR property."          (d)  CRR 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 CRR charges   depends on further acts of the gas utility or others that have not   yet occurred. The financing order shall remain in effect, and the   CRR property shall continue to exist for the same period as the   pledge of the state described in Section 104.372.          (e)  All revenues and collections resulting from CRR charges   shall constitute proceeds only of a property right arising from the   financing order.          (f)  An amount owed by the authority or an issuer under a   credit agreement shall be payable from and secured by the CRR   property, including CRR charges and amounts to the extent provided   in the proceedings authorizing the credit agreement.          SECTION 9.  Chapter 104, Utilities Code, is amended by   adding Section 104.365 to read as follows:          Sec. 104.365.  NO SET-OFF. The interest of an assignee or   pledgee in CRR property, including the revenues and collections   arising from CRR charges are 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 shall remain in effect and   unabated notwithstanding the bankruptcy of the gas utility, the   authority or their successors, or assignees.          SECTION 10.  Chapter 104, Utilities Code, is amended by   adding Section 104.366 to read as follows:          Sec. 104.366.  NO BYPASS. A financing order shall include   terms ensuring that the imposition and collection of the CRR charge   authorized in the order shall be non-bypassable.          SECTION 11.  Chapter 104, Utilities Code, is amended by   adding Section 104.367 to read as follows:          Sec. 104.367.  TRUE-UP. The financing order shall include a   formulaic true-up charge adjustment mechanism that requires that   the CRR charges be reviewed and adjusted at least annually, at time   periods and frequencies provided in the financing order, to correct   any overcollections or under collections of the preceding 12 months   and to ensure the expected recovery of amounts sufficient to   provide for the timely payment of upcoming scheduled CRR bond   payments and financing costs. Such true-up charge adjustments   shall become effective within 30 days of the receipt of the true-up   charge adjustment letter from the gas utility or replacement   servicer to the commission that notifies the commission of the   pending adjustment. Any administrative review of such charge   adjustments shall be limited to notifying the servicer of   mathematical or clerical errors in the calculation, and the   servicer may correct its error and refile its letter, with the   adjustment becoming effective as soon as possible within 30 days   after the refiled letter.          SECTION 12.  Chapter 104, Utilities Code, is amended by   adding Section 104.368 to read as follows:          Sec. 104.368.  SECURITY INTERESTS; ASSIGNMENT; COMMINGLING;   DEFAULT. (a) CRR 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 CRR property are governed by this section and   not by the Business & Commerce Code.          (b)  A valid and enforceable lien and security interest in   CRR property may be created only by a financing order and the   execution and delivery of a security agreement with a financing   party in connection with the issuance of CRR bonds. The lien and   security interest shall attach automatically from the time that   value is received for the CRR 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 CRR 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 CRR 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 CRR 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 104.368 or by the commingling of   funds arising from CRR 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 CRR 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 CRR bonds,   the financing parties or their representatives, a district court of   Travis County, on application by or on behalf of the financing   parties, shall order the sequestration and payment to them of   revenues arising from the CRR charges.          SECTION 13.  Chapter 104, Utilities Code, is amended by   adding Section 104.369 to read as follows:          Sec. 104.369.  BOND PROCEEDS. (a) The proceeds of CRR bonds   issued by or on behalf of the authority under this subchapter may be   deposited with a trustee selected by the authority or held by the   comptroller in a dedicated trust fund outside the state treasury in   the custody of the comptroller.          (b)  Bond proceeds, including investment income, shall be   held in trust for the exclusive benefit of the commission's policy   of reimbursing such gas utility costs. The authority shall use the   proceeds 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, as applicable.          (c)  Any excess money remaining after the purposes for which   the bonds were issued is satisfied may be used to provide credits to   gas utility customers.          (d)  If there are no outstanding bonds or bond interest to be   paid, the remaining proceeds shall be used to provide credits to gas   utility customers.          SECTION 13.  Chapter 104, Utilities Code, is amended by   adding Section 104.370 to read as follows:          Sec. 104.370.  REPAYMENT OF CRR BONDS. (a) If any CRR bonds   and related financing costs remain outstanding, a uniform, monthly,   volumetric CRR charges shall be paid by all existing and future   customers that receive service from a gas utility for whom a   regulatory asset determination under Section 104.363. A gas   utility and its successors, assigns and or replacements, shall   continue to bill and collect, as servicer, CRR charges from the gas   utility's existing and future customers until all CRR bonds and   financing costs are paid in full.          (b)  With regard to outstanding CRR bonds issued by the   authority under this subchapter, the authority shall report to the   commission the amount of the bond obligations outstanding and the   estimated amount of bond administrative expenses each year.          (c)  All revenue collected from the CRR charges shall be   promptly remitted by the applicable servicers to the authority to   pay bond obligations, ongoing financing costs, and bond   administrative expenses to ensure timely payment of bond   obligations and financing costs.          (d)  Revenues received from the CRR charges may be applied   only as provided by this subchapter.          (e)  Bond obligations are payable only from sources provided   for payment in this subchapter.          SECTION 14.  Chapter 104, Utilities Code, is amended by   adding Section 104.371 to read as follows:          Sec. 104.371.  PLEDGE OF STATE. (a) CRR bonds issued under   this subchapter, and any related ancillary agreement, or credit   agreement, are not a debt of the state or any state agency or   political subdivision of the state and are not a pledge of the faith   and credit of any of them. A CRR bond, ancillary agreement, or   credit agreement is payable solely from CRR charges as provided by   this subchapter.          (b)  The state, including the commission and the authority   pledge, however, for the benefit and protection of the financing   parties and the gas utility, that it will not take or permit any   action that would impair the value of CRR property, or, except as   permitted by Section 104.368, reduce, alter, or impair the CRR   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 CRR bonds and   financing costs have been paid and performed in full. The authority   or any other entity issuing CRR bonds is authorized to include this   pledge in any documentation relating to those bonds.          SECTION 15.  Chapter 104, Utilities Code, is amended by   adding Section 104.372 to read as follows:          Sec. 104.372.  TAX EXEMPTION. (a) A CRR bond issued under   this subchapter, any transaction relating to CRR bonds, and profits   made from the sale of CRR bonds are exempt from taxation by this   state or by a municipality or other political subdivision of this   state.          (b)  A gas utility's receipt or collection of CRR charge   amounts is exempt from state and local income, sales, franchise,   gross receipts, and other taxes or similar assessment.          (c)  Any tax obligation of the gas utility arising from its   receipt of CRR bond proceeds, or from the collection or remittance   of CRR charges is an expense that shall be recovered by the gas   utility.          SECTION 16.  Chapter 104, Utilities Code, is amended by   adding Section 104.373 to read as follows:          Sec. 104.373.  NOT PUBLIC UTILITY. An assignee or financing   party shall not be considered to be a public utility or person   providing natural gas service solely by virtue of the transactions   described in this subchapter.          SECTION 17.  Chapter 104, Utilities Code, is amended by   adding Section 104.374 to read as follows:          Sec. 104.374.  NO PERSONAL LIABILITY. The Commissioners of   the commission, commission employees, the board of directors of the   authority, and the employees of the authority shall not be   personally liable as a result of exercising the duties and   responsibilities established under this subchapter.          SECTION 18.  Chapter 104, Utilities Code, is amended by   adding Section 104.375 to read as follows:          Sec. 104.375.  SEVERABILITY. Effective on the date the CRR   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 CRR bonds or to any actions of the gas   utility, its successors, an assignee, a collection agent, or a   financing party, which shall remain in full force and effect.          SECTION 20.  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.