1. Public Utility Law Section Annual Seminar
Water Utilities: The Latest on CCN Decertifications, Compensation, and Rates
Public Utility Law Section Annual Seminar
August 18, 2017 Austin, Texas

2. Introduction and Landowner Issues Leonard Dougal Jackson Walker LLP

3. Evolution of CCN Policy
SB 1
“Promote Regional Water Systems”
HB 2876
Landowner Decert “Expedited Release” (a-1)
HB 1600
CCN & Rates Transfer to PUC (Eff )
SB 573
Landowner Decert “Streamlined Expedited Release”
(a-5)
TCEQ Regionalization Policy
________________________________________________________________________________________________________________________________
      

4. Water and Sewer CCN Viewer

5. Statutory Authority for CCN Decertification
TWC
(a) After Notice and Hearing
(a-1) Expedited Release (50+ Acres)
(a-5) Streamlined Exp. Release (25+ Acres)
TWC
Area Incorporated or Annexed by City
(Only: WSC, SUD, FWSD, IOU w/in City 1.7M)

6. 33 Texas Counties Streamlined Expedited Release 13.254(a-5)

7. Streamlined Expedited Release Water Code 13.254(a-5)
Thresholds
Land Within the 33 Counties
Tract of 25 (Contiguous) Acres, or more
Not Receiving Water/Sewer Service
Process
Landowner Petition to PUC
Legal Description/Ownership
Shall Grant w/in 60 Days

8. Landowner Decertification Considerations
Is There (Actual) Service on the Property?
Who is the Alternative Service Provider?
Are they Better
Cost to Serve
Ability to Serve
Timing
Will Compensation be Owed to the Former CCN Holder?

9. CCN Holder Perspective Geoff Kirshbaum Terrill & Waldrop

10. Rulemaking
“Useless or valueless property” – Definition at 16 TAC §24.113(b)(6)
Property that has been rendered useless or valueless to a former CCN holder by revocation or amendment, including by expedited release or streamlined expedited release, under this section.
“The Commission agrees that the term property is broad and includes both real and personal property, and tangible and intangible property, but the adjectives useless and valueless restrict the relevant property to that rendered useless or valueless as a result of decertification.” Project No , Order Adopting Rules, at 6 (May 4, 2017).
Broad Service Definition from TWC §13.002(21) and 16 TAC §24.3(62) - Not Changed:
“Service” means any act performed, anything furnished or supplied, and any facilities or lines committed or used by a retail public utility in the performance of its duties under this chapter to its patrons, employees, other retail public utilities, and the public, as well as the interchange of facilities between two or more retail public utilities.

11. TWC 13.254(a-5)-(a-6) Expedited Releases
“Tract of land not receiving water or sewer service”
Commission requiring facilities “committed” specifically to decertification tract (e.g., lines, meters, or connections).
Facilities generally available to CCN area that may include tract are not enough.
Commission may be requiring active meter for “service” (see, e.g., PUC Docket No , In re: Marilee Special Utility District, Final Order (May 19, 2017); but see PUC Docket No , In re Markout Water Supply Corporation, Motion to Overturn (August 27, 2014), Final Order (October 3, 2014) (meters on property, but shut off by property owner request (and may have been illegally restored by property tenant)).
Commission points to Tex. General Land Office v. Crystal Clear Water Supply Corporation, 449 S.W.3d 130, (Austin 2014, pet. denied) - but this case recognizes the broad TWC definition of “service.”

12. TWC 13.254(a-5)-(a-6) Expedited Releases
Compensation
13.254(g) contains factors for valuing property rendered useless or valueless by decertification; bifurcated hearing process
Aqua Texas/City of Celina (PUC Docket No ) (TWC § Expedited Release Compensation)
ALJs’ Proposal for Decision - attaching physical facility requirement to compensation for spent money equates to “property purgatory”
Order on Rehearing -
$0 result
spent money is not property of the utility even though “expenditures may have been made using money that was formerly the property of the utility. . .”
The utility “must show that money was expended to obtain property rather than services.”
City of Lampasas/Kempner WSC (PUC Docket No )(TWC § Expedited Release Compensation)
Proposal for Decision: followed Aqua/Celina - no compensation
Commission voted to approve PFD (no order yet)

13. TWC 13.255 Single Certification in Incorporated or Annexed Areas
Compensation for property rendered useless or valueless by the decertification is the main question for single certification of raw land to annexing municipality – limited application, but “receiving service” is not an issue
Example Cases: Green Valley SUD - City of Cibolo (PUC Docket No ); Green Valley SUD - City of Schertz (PUC Docket No ) - Interim orders on compensation issues follow Celina

14. 7 U.S.C. § 1926(b) Service Area Protection/Federal Law
Green Valley Special Util. Dist. v. City of Cibolo, No , Tex. App. LEXIS (5th Cir. Aug. 2, 2017)
CCN’s state law duty to provide continuous and adequate service is the equivalent of making service available under 7 U.S.C. § 1926(b) (previously, Fifth Circuit held in North Alamo that such protected service area is “sacrosanct” (include cite)) and may not be “curtailed or limited”
§ 1926(b)’s protection for rural utility borrowers is not tied to the service funded by a USDA loan

15. 7 U.S.C. § 1926(b) Service Area Protection/Federal Law
TWC § (a-6) [not TWC §13.255]
“The utility commission may not deny a petition received under Subsection (a-5) based on the fact that a certificate holder is a borrower under a federal loan program.”
This issue is currently being litigated.
Case No. 1:17-cv-00254; Crystal Clear SUD v. Public Utility Commission et al; in the United States District Court, Western District of Texas, Austin Division.

16. Conclusions
Commission has set very high bar for protecting service area from a CCN decertification in TWC § expedited release cases and for receiving compensation following a CCN decertification in both TWC § and § cases
Law in this area is evolving
Service area planning is difficult for a CCN Holder in the meantime

17. Municipal Perspective Art Rodriguez Russell Rodriguez Hyde & Bullock LLP

18. Expedited Releases (Streamlined) New Process
PUC Rule
Landowner Petition
Rebuttable Presumption - no useless or valueless property
Current CCN Holder Fails to Intervene – Conclusively demonstrated
Current CCN holder bear burden of proof on useless or valueless property
PUC makes final determination of useless or valueless property

19. Expedited Releases (Streamlined) Compensation
Compensation only for Useless or Valueless Property
90 day process from Notice of Intent to Serve
Valuation of Real Property
Valuation of Personal Property

20. Valuation of Property Real Property Personal Property
Property Code Chap. 21
Personal Property
Debt allocable
Value of service facilities located within the removed area
Expenditures for planning, design, or construction of the service facilities
Amount of contractual obligations

21. Valuation of Property (Cont.)
Personal Property
Any demonstrated impairment of service
Increase of cost to consumers
Impact on future revenues lost from existing customers
Legal and Professional fees
Any other relevant factors

22. City as CCN Holder City – No CCN necessary
Development/Connection Requirements
Expedited Releases
Beneficial
Detrimental

23. Policy and Legislative Erin Selvera Texas Rural Water Association

24. Regionalization
PUC
TWDB
TCEQ

25. TCEQ Statutes Rules TWC 11.0235. Policy Regarding Waters Of The State
TWC  Policy of Subchapter
TWC Regional Or Area-wide Systems; General Policy
TWC Rates For Services By Designated Systems
Rules
30 TAC
30 TAC Chapter 295

26. PUC Statutes Rules TWC 13.183 Fixing Overall Revenues
TWC Granting Certificates
Rules
16 TAC Criteria for Granting or Amending a Certificate of Convenience and Necessity
16 TAC Cost of Service.
16 TAC Alternative Rate Methods

27. Top 10 Systems impacted by 13.254(a-5)
CCN holder
Number of Petitions
Type
Chisholm Trail SUD 14 W
Aqua Texas, Inc. 12
W&S
Tall Timbers Utility Co., Inc. 11 S
Creedmoor-Maha WSC 8
Gulf Coast Waste Disposal Authority
Mustang SUD
G&W SUD 7
Marilee SUD 6
Crystal Clear WSC/SUD 5
HMW SUD

28. TWDB Statutes Rules TWC 15.001 Definitions TWC 15.002 Purpose
TWC  Financial Assistance
TWC Prioritization of Projects by the Board
TWC   Joint Efforts by Districts in a Management Area
Rules
TAC Chapter 357 28

29. SWIFT Project Prioritization
Highest Consideration
Additional Criteria
Serve a large population 30
Local contribution, including federal funding 5
Provide assistance to a diverse urban and rural population
Financial capability of the applicant to repay 2
Provide regionalization
Emergency Need
Meet a high percentage of water supply needs of users to be served by the project
Demonstration or projected effect of the project on water conservation, including preventing water loss 15
Readiness to proceed 8
Priority assigned by the regional water planning group
Maximum subtotal 50
Maximum Subtotal
Maximum Total Points: 100

30. Regionalization Policy
PUC
TWDB
TCEQ

31. Regionalization Policy
PUC
TWDB
TCEQ

32. PANEL MEMBERS Arturo D. Rodriguez, Jr. Leonard H. Dougal
Russell Rodriguez Hyde Bullock, LLP
Erin Selvera
Texas Rural Water Association
Leonard H. Dougal
Jackson Walker L.L.P.
Geoffrey P. Kirshbaum
Terrill & Waldrop