87R16129 CXP-F     By: Paddie H.B. No. 1520     Substitute the following for H.B. No. 1520:     By:  Darby C.S.H.B. No. 1520       A BILL TO BE ENTITLED   AN ACT   relating to the recovery and securitization of certain   extraordinary costs incurred by certain gas utilities; providing   authority to issue bonds and impose fees and assessments.          BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:          SECTION 1.  Section 1232.002, Government Code, is amended 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;   [and]                (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.  Section 1232.066(a), Government Code, is amended   to read as follows:          (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; [or]                (3)  stranded costs of a municipal power agency; or                (4)  customer rate relief bonds approved by the   Railroad Commission of Texas.          SECTION 3.  Subchapter C, Chapter 1232, Government Code, is   amended by adding Section 1232.1072 to read as follows:          Sec. 1232.1072.  ISSUANCE OF OBLIGATIONS FOR FINANCING   CUSTOMER RATE RELIEF BONDS. (a)  The authority, either directly or   by means of a trust established by the authority, may issue   obligations or other evidences of indebtedness for financing   customer rate relief bonds approved under Subchapter I, Chapter   104, Utilities Code.          (b)  On a request to the authority from the Railroad   Commission of Texas, the authority shall:                (1)  issue obligations or other evidences of   indebtedness in the amount of the requested customer rate relief   bonds, plus the issuance costs; and                (2)  grant to the Railroad Commission of Texas the   proceeds of the obligations or evidences of indebtedness described   by Subdivision (1).          (c)  The request from the Railroad Commission of Texas   described by Subsection (b) must include a statement of the payment   terms for recovering customer rate relief costs.          (d)  Obligations or evidences of indebtedness the authority   issues under this section must be created under financing orders   issued by the Railroad Commission of Texas. The financing orders   must authorize the authority to create legally isolated,   bankruptcy-remote financing entities to hold customer rate relief   property.  The authority may establish a financing entity   authorized by a financing order.          (e)  Obligations or evidences of indebtedness the authority   issues under this section for each approved customer rate relief   financing must include, as part of the financing costs of the   financing, the administrative costs related to the financing.          (f)  Obligations or evidences of indebtedness the authority   issues under this section must be secured by:                (1)  customer rate relief property, as defined by   Section 104.362, Utilities Code; and                (2)  customer rate relief charges, as defined by   Section 104.362, Utilities Code, that are nonbypassable, as defined   by that section, imposed by the authority on customers receiving   natural gas services provided by the gas utility, as defined by that   section, that is making the request to recover a regulatory asset   under Section 104.365, Utilities Code.          (g)  The customer rate relief property and customer rate   relief charges described by Subsection (f) must be consistent with   the customer rate relief recovery terms stated in the gas utility's   request to recover a regulatory asset under Section 104.365,   Utilities Code, unless otherwise approved by the Railroad   Commission of Texas.          (h)  An obligation or evidence of indebtedness the authority   issues under this section is not a debt of this state, the Railroad   Commission of Texas, or a gas utility.          (i)  The Railroad Commission of Texas shall provide to the   authority assistance necessary to ensure that the customer rate   relief charges described by Subsection (f) are collected and   enforced, either directly or by using the assistance and powers of   the gas utility requesting to recover a regulatory asset under   Section 104.365, Utilities Code, as servicer.          (j)  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.          (k)  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 may not be included as part of the measurement of a tax by   this state or a political subdivision of this state.          (l)  The authority shall make periodic reports to the   Railroad Commission of Texas and the public regarding each   financing made under this section.          SECTION 4.  Section 1232.108, Government Code, is amended to   read as follows:          Sec. 1232.108.  LEGISLATIVE AUTHORIZATION REQUIRED. Except   as permitted by Section 1232.1072, 1232.109, 2166.452, 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. 104.361.  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 incur to secure gas supply and provide service during   natural and man-made disasters, system failures, or other   catastrophic events, and to restore gas utility systems after those   types of events, 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 extraordinary costs described by Subsection   (a) are recovered from customers; and                (2)  support the financial strength and stability of   gas utility companies.          (b)  The railroad commission shall ensure that:                (1)  securitization provides tangible and quantifiable   benefits to customers, greater than would have been achieved absent   the issuance of customer rate relief bonds; and                (2)  the structuring and pricing of the customer rate   relief bonds result in customer rate relief bond charges consistent   with the terms of the applicable financing order and market   conditions at the time of the pricing of the customer rate relief   bonds.          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, other hedging arrangement, or liquidity or credit   support arrangement.                (2)  "Assignee" means any legally recognized entity to   which an interest in customer rate relief property is transferred,   other than as security. The term includes a corporation, limited   liability company, public authority, trust, general partnership,   limited partnership, or other financing entity.                (3)  "Authority" means the Texas Public Finance   Authority.                (4)  "Bond administrative expenses" means expenses   incurred to administer customer rate relief bonds issued under this   subchapter, including fees for paying agents, trustees, and   attorneys, and for paying for other professional services necessary   to ensure compliance with applicable state or federal law.                (5)  "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.                (6)  "Credit agreement" means a loan agreement,   revolving credit agreement, agreement establishing a line of   credit, or similar financing arrangement.                (7)  "Customer rate relief bonds" means bonds, notes,   certificates, or other evidences 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 assignee under a financing   order; and                      (B)  payable from and secured by customer rate   relief property and amounts on deposit in the obligation trust fund   to the extent provided by the applicable financing order.                (8)  "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, 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, even if a customer elects to purchase gas from an   alternative gas supplier.                (9)  "Customer rate relief property" means property   described by Section 104.367.                (10)  "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 and 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 and ongoing costs related to   supporting, repaying, servicing, or refunding customer rate relief   bonds, including servicing fees, accounting and auditing fees,   trustee fees, legal fees and expenses, consulting fees,   administrative fees, printing fees, financial advisor fees and   expenses, Securities and Exchange Commission 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; and                      (D)  the costs to the railroad commission of   acquiring professional services for the purpose of evaluating   extraordinary costs under this subchapter.                (11)  "Financing order" means an order adopted under   Section 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.                (12)  "Financing party" means a holder of customer rate   relief bonds, including a trustee, collateral agent, any party   under an ancillary agreement, or other person acting for the   holder's benefit.                (13)  "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.                (14)  "Nonbypassable" means a charge that 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                      (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, or any later notice or order issued by the railroad   commission for other similarly authorized natural or man-made   disasters or system failure events.          Sec. 104.363.  EXTRAORDINARY COSTS. (a) For the purposes of   this subchapter, extraordinary costs are the reasonable and   necessary costs placed in a regulatory asset and approved by the   railroad commission in a regulatory asset determination under   Section 104.365.          (b)  Extraordinary costs include any costs of acquiring,   retiring, and refunding a gas utility's existing debt and equity   securities or credit facilities in connection with the issuance of   customer rate relief bonds.          (c)  Extraordinary costs 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:                (1)  a tropical storm or hurricane, ice or snow storm,   flood, or other weather-related event;                (2)  a natural or man-made disaster;                (3)  a system failure; or                (4)  another catastrophic event.          (d)  Extraordinary costs may include:                (1)  natural gas procurement costs above normalized   market pricing, mobilization, staging, construction,   reconstruction, replacement, or repair of system facilities; and                (2)  reasonable estimates of the costs of natural gas   procurement above normalized market pricing and any activity   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.          (e)  Cost estimates described by Subsection (d)(2) may be   subject to reconciliation after the actual costs become known   before the railroad commission makes a determination as to the   utility's regulatory asset in accordance with Section 104.365.          (f)  A carrying charge interest rate at the gas utility's   cost of long-term debt as last approved by the railroad commission   in a general rate proceeding may be considered an extraordinary   cost if the railroad commission's final order approving the cost of   long-term debt was filed not more than three years before the date   the application for regulatory asset recovery was filed. The   railroad commission's final order may be an order on rehearing.          (g)  If the railroad commission's final order approving the   gas utility's current cost of long-term debt does not meet the   requirements of Subsection (f), an alternative cost of long-term   debt must be used that reflects the average cost of long-term debt   established by the railroad commission for all gas utilities based   on final orders issued in the most recent three-year period   preceding the date the application for regulatory asset recovery is   filed.          (h)  The carrying charge interest rate set at the applicable   cost of long-term debt described by Subsection (f) or (g) must be   applied from the date on which the extraordinary costs were   incurred until the date that:                (1)  customer rate relief bonds are issued; or                (2)  extraordinary costs are otherwise recovered by the   gas utility under this subchapter.          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 charges to   service customer rate relief bonds, and financing costs. Customer   rate relief charges, if authorized by the railroad commission   through a financing order in that commission's sole discretion,   must be imposed pursuant to customer rate relief property and not by   a 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.          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.          (b)  A gas utility desiring to participate in the customer   rate relief bond process under a financing order must file an   application with the railroad commission not later than the 90th   day after the date of the conclusion of the event for which   regulatory asset recovery is requested. The railroad commission   shall determine an application date deadline consistent with this   subsection.          (c)  Notwithstanding the deadline provided by Subsection   (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 relating to the February 2021 winter storm may   file an application with the railroad commission on or before the   60th day after the effective date of the Act enacting this   subchapter.          (d)  If the railroad commission does not make a final   determination regarding the regulatory asset amount to be recovered   by a gas utility before the 91st 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.          (e)  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.          (f)  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.          (g)  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.          (h)  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 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.          (i)  The railroad commission by order shall establish a   schedule, filing requirements, and a procedure for determining the   prudence of the costs included in a gas utility's regulatory asset.          (j)  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 described by Section 104.363(c), 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.          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 issue customer   rate relief bonds on the railroad commission's behalf. 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 pricing, and proposed financing costs of the customer rate   relief bonds are reasonably expected to provide benefits to   customers by comparing:                (1)  the net present value of the costs to customers   resulting from the issuance of customer rate relief bonds; and                (2)  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.          (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 authority's issuance of customer   rate relief bonds through one or more legally isolated,   bankruptcy-remote financing entities established by the authority;                (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; and                      (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;                (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 for   which a regulatory asset determination has been made under Section   104.365 to guarantee that the bonds will be paid in full;                (7)  authorize the creation of customer rate relief   property in favor of the authority and the authority's transfer of   the property;                (8)  direct the authority to disperse the proceeds of   customer rate relief bonds to gas utilities for which a regulatory   asset determination has been made under Section 104.365 and include   the amounts to be distributed;                (9)  provide that customer rate relief charges be   collected and allocated among customers of each 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 each 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 principal amount determined by the railroad   commission may be increased to include an amount sufficient to:                (1)  pay the financing costs for 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 railroad commission.          (e)  The authority, consistent with this subchapter and the   terms of the financing order, shall:                (1)  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; and                (2)  determine the methods of sale, types of bonds,   bond forms, maximum interest rates, 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 financings at   the lowest practicable cost.          (f)  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 customer rate relief bonds.          (g)  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, are irrevocable and not subject   to reduction, impairment, or adjustment by further action of the   railroad commission, except as provided under Subsection (i) and   authorized by Section 104.370.          (h)  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.          (i)  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.          (j)  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.          (k)  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 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.          (l)  The authority shall issue customer rate relief bonds not   later than the 45th day after receipt of a financing order issued   under this section.          (m)  The authority shall deliver customer rate relief 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 104.365 not later than   the 15th day after the date of issuance of the customer rate relief   bonds.          (n)  For the weather-related event that occurred in February   2021, the authority shall deliver customer rate relief bond   proceeds net of upfront financing costs to each gas utility no later   than December 31, 2021. This subsection expires September 1, 2023.          Sec. 104.367.  PROPERTY RIGHTS. (a) Customer rate relief   bonds are solely the obligation of the assignee or 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.          (b)  Customer rate relief bonds are nonrecourse to the credit   or any assets of this state or the authority.          (c)  The rights and interests of the authority or the   authority's successor under a financing order, including the right   to impose and receive customer rate relief charges authorized in   the financing order, are only contract rights until first   transferred to an assignee or 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 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 the authority or an issuer under a   credit agreement is payable from and secured by the customer rate   relief property, including customer rate relief charges and amounts   to the extent provided in the proceedings authorizing the credit   agreement.          Sec. 104.368.  PROPERTY INTEREST NOT SUBJECT TO SETOFF,   COUNTERCLAIM, SURCHARGE, OR DEFENSE. The interest of an assignee   or pledgee in customer rate relief property, including the revenue   and collections arising from customer rate relief 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 remains in effect and unabated notwithstanding the bankruptcy   of the gas utility or authority, or any successor or assignee of the   gas utility or authority.          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.          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, 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 upcoming scheduled customer   rate relief bond payments and 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 gas utility 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.          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   are governed by this section and not by the Business & Commerce   Code.          (b)  A valid and enforceable lien and security interest in   customer rate relief 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 customer rate   relief bonds. The lien and security interest attach automatically   from the time that value is received for the customer rate relief   bonds and, on perfection through the filing of notice with the   secretary of state in accordance with the rules prescribed under   Subsection (d), are a continuously perfected lien and security   interest in the customer rate relief property and all proceeds of   the property, whether accrued or not, have priority in the order of   filing and take precedence over any subsequent judicial or other   lien creditor.  The security interest is perfected as of the date of   the filing, except that if notice is filed before the 11th day after   value is received for the customer rate relief bonds, the security   interest is perfected retroactive to the date value was received.          (c)  Transfer of an interest in customer rate relief property   to an assignee is 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). If   notice of the transfer is not filed in accordance with this   subsection before the 11th day 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:                (1)  establish and maintain a separate system of   records for the filing of notices under this section; and                (2)  adopt rules governing filing notices under this   section that are based on Chapter 9, Business & Commerce Code,   adapted to this subchapter, and use the terms as defined by 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 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 assignee or a financing party. If   customer rate relief property has been transferred to an assignee,   any proceeds of that property must be held in trust for the   assignee.          (f)  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.          Sec. 104.372.  BOND PROCEEDS IN TRUST. (a) The authority   may deposit proceeds of customer rate relief bonds issued by or on   behalf of the authority under this subchapter with a trustee   selected by the authority 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, including investment income, must be   held in trust for the exclusive benefit of the railroad   commission's policy of reimbursing 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)  If there are no outstanding bonds or bond interest to be   paid, the remaining proceeds must be used to provide credits to gas   utility customers.          Sec. 104.373.  REPAYMENT OF CUSTOMER RATE RELIEF BONDS. (a)   If 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, as servicer, 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 authority 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 authority to pay bond obligations, ongoing financing costs, and   bond administrative expenses to ensure timely payment of bond   obligations and financing costs.          (d)  Revenue received from the customer rate 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.          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. The   authority or any other entity issuing customer rate relief bonds   may include this pledge in any documentation relating to those   bonds.          Sec. 104.375.  TAX EXEMPTION. (a) Customer rate relief   bonds issued under this subchapter, transactions relating to   customer rate relief bonds, and profits made from the sale of   customer rate relief bonds are exempt from taxation by this state or   a political subdivision of this state.          (b)  A gas utility's receipt or collection of customer rate   relief charges is exempt from state and local income, sales,   franchise, gross receipts, and other taxes or similar assessments.          (c)  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 expense that may be   recovered by the gas utility.          Sec. 104.376.  ASSIGNEE OR FINANCING PARTY NOT PUBLIC   UTILITY. An assignee 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.          Sec. 104.377.  NO PERSONAL LIABILITY. A commissioner of the   railroad commission, a railroad commission employee, a member of   the board of directors of the authority, or an employee of the   authority is not personally liable for a result of an exercise of a   duty or responsibility established under this subchapter.          Sec. 104.378.  SEVERABILITY. After the date customer rate   relief 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 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.          SECTION 6.  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.