CHAPTER 37. CERTIFICATES OF CONVENIENCE AND NECESSITY - Texas Statutes

UTILITIES CODE

TITLE 2. PUBLIC UTILITY REGULATORY ACT

SUBTITLE B. ELECTRIC UTILITIES

CHAPTER 37. CERTIFICATES OF CONVENIENCE AND NECESSITY

SUBCHAPTER A. DEFINITIONS

Sec. 37.001. DEFINITIONS. In this chapter:

(1) "Certificate" means a certificate of convenience and

necessity.

(2) "Electric utility" includes an electric cooperative.

(3) "Retail electric utility" means a person, political

subdivision, electric cooperative, or agency that operates,

maintains, or controls in this state a facility to provide retail

electric utility service. The term does not include a corporation

described by Section 32.053 to the extent that the corporation

sells electricity exclusively at wholesale and not to the

ultimate consumer. A qualifying cogenerator that sells electric

energy at retail to the sole purchaser of the cogenerator's

thermal output under Sections 35.061 and 36.007 is not for that

reason considered to be a retail electric utility. The owner or

operator of a qualifying cogeneration facility who was issued the

necessary environmental permits from the Texas Natural Resource

Conservation Commission after January 1, 1998, and who commenced

construction of such qualifying facility before July 1, 1998, may

provide electricity to the purchasers of the thermal output of

that qualifying facility and shall not for that reason be

considered an electric utility or a retail electric utility,

provided that the purchasers of the thermal output are owners of

manufacturing or process operation facilities that are located on

a site entirely owned before September, 1987, by one owner who

retained ownership after September, 1987, of some portion of the

facilities and that those facilities now share some integrated

operations, such as the provision of services and raw materials.

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

Amended by Acts 1999, 76th Leg., ch. 405, Sec. 29, eff. Sept. 1,

1999.

SUBCHAPTER B. CERTIFICATE OF CONVENIENCE AND NECESSITY

Sec. 37.051. CERTIFICATE REQUIRED. (a) An electric utility or

other person may not directly or indirectly provide service to

the public under a franchise or permit unless the utility or

other person first obtains from the commission a certificate that

states that the public convenience and necessity requires or will

require the installation, operation, or extension of the service.

(b) Except as otherwise provided by this chapter, a retail

electric utility may not furnish or make available retail

electric utility service to an area in which retail electric

utility service is being lawfully furnished by another retail

electric utility unless the utility first obtains a certificate

that includes the area in which the consuming facility is

located.

(c) Notwithstanding any other provision of this chapter,

including Subsection (a), an electric cooperative is not required

to obtain a certificate of public convenience and necessity for

the construction, installation, operation, or extension of any

generating facilities or necessary interconnection facilities.

(d) A certificate may be granted to an electric utility or other

person under this section for a facility used as part of the

transmission system serving the ERCOT power region solely for the

transmission of electricity.

(e) The commission may consider an application filed by a person

not currently certificated as an electric utility for a

certificate of convenience and necessity to construct

transmission capacity that serves the ERCOT power region. Before

granting a certificate under this section, the commission must

find, after notice and hearing, that:

(1) the applicant has the technical ability, financial ability,

and sufficient resources in this state to own, operate, and

maintain reliable transmission facilities;

(2) the applicant has the resources and ability to comply with

commission rules, requirements of the independent organization

certified under Section 39.151 for the ERCOT power region, and

requirements of the National Electric Reliability Council

applicable to the provisions of transmission service; and

(3) for an application filed by a person that is not an electric

utility, granting the application will not adversely affect

wholesale transmission rates, as compared to the rates projected

to be charged if an existing electric utility were to build the

transmission facility.

(f) The commission shall consider the requirements of Subsection

(e) to have been met by an electric utility or other person that:

(1) is selected by the commission as a transmission provider

under a plan adopted by the commission under Section 39.904 not

later than September 1, 2009; and

(2) before the certificate is issued, provides to the commission

a detailed plan regarding the offices, personnel, and other

resources the electric utility or other person will have in this

state to ensure provision of continuous and adequate transmission

service.

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

Amended by Acts 1999, 76th Leg., ch. 405, Sec. 30, eff. Sept. 1,

1999.

Amended by:

Acts 2009, 81st Leg., R.S., Ch.

1170, Sec. 2, eff. June 19, 2009.

Sec. 37.052. EXCEPTIONS TO CERTIFICATE REQUIREMENT FOR SERVICE

EXTENSION. (a) An electric utility is not required to obtain a

certificate for an:

(1) extension into territory that is:

(A) contiguous to the territory the electric utility serves;

(B) not receiving similar service from another electric utility;

and

(C) not in another electric utility's certificated area;

(2) extension in or to territory the utility serves or is

authorized to serve under a certificate; or

(3) operation, extension, or service in progress on September 1,

1975.

(b) An extension allowed under Subsection (a) is limited to a

device used:

(1) to interconnect existing facilities; or

(2) solely to transmit electric utility services from an

existing facility to a customer of retail electric utility

service.

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

Sec. 37.053. APPLICATION FOR CERTIFICATE. (a) An electric

utility or other person that wants to obtain or amend a

certificate must submit an application to the commission.

(b) The applicant shall file with the commission evidence the

commission requires to show the applicant has received the

consent, franchise, or permit required by the proper municipal or

other public authority.

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

Amended by:

Acts 2009, 81st Leg., R.S., Ch.

1170, Sec. 3, eff. June 19, 2009.

Sec. 37.054. NOTICE AND HEARING ON APPLICATION. (a) When an

application for a certificate is filed, the commission shall:

(1) give notice of the application to interested parties; and

(2) if requested:

(A) set a time and place for a hearing; and

(B) give notice of the hearing.

(b) A person or electric cooperative interested in the

application may intervene at the hearing.

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

Amended by Acts 1999, 76th Leg., ch. 405, Sec. 31, eff. Sept. 1,

1999.

Sec. 37.0541. CONSOLIDATION OF CERTAIN PROCEEDINGS. The

commission shall consolidate the proceeding on an application to

obtain or amend a certificate of convenience and necessity for

the construction of a transmission line with the proceeding on

another application to obtain or amend a certificate of

convenience and necessity for the construction of a transmission

line if it is apparent from the applications or a motion to

intervene in either proceeding that the transmission lines that

are the subject of the separate proceedings share a common point

of interconnection. This section does not apply to a proceeding

on an application for a certificate of convenience and necessity

for a transmission line to serve a competitive renewable energy

zone as part of a plan developed by the commission under Section

39.904(g)(2).

Added by Acts 2009, 81st Leg., R.S., Ch.

1170, Sec. 1, eff. June 19, 2009.

Sec. 37.055. REQUEST FOR PRELIMINARY ORDER. (a) An electric

utility or other person that wants to exercise a right or

privilege under a franchise or permit that the utility or other

person anticipates obtaining but has not been granted may apply

to the commission for a preliminary order under this section.

(b) The commission may issue a preliminary order declaring that

the commission, on application and under commission rules, will

grant the requested certificate on terms the commission

designates, after the electric utility or other person obtains

the franchise or permit.

(c) The commission shall grant the certificate on presentation

of evidence satisfactory to the commission that the electric

utility or other person has obtained the franchise or permit.

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

Amended by:

Acts 2009, 81st Leg., R.S., Ch.

1170, Sec. 4, eff. June 19, 2009.

Sec. 37.056. GRANT OR DENIAL OF CERTIFICATE. (a) The

commission may approve an application and grant a certificate

only if the commission finds that the certificate is necessary

for the service, accommodation, convenience, or safety of the

public.

(b) The commission may:

(1) grant the certificate as requested;

(2) grant the certificate for the construction of a portion of

the requested system, facility, or extension or the partial

exercise of the requested right or privilege; or

(3) refuse to grant the certificate.

(c) The commission shall grant each certificate on a

nondiscriminatory basis after considering:

(1) the adequacy of existing service;

(2) the need for additional service;

(3) the effect of granting the certificate on the recipient of

the certificate and any electric utility serving the proximate

area; and

(4) other factors, such as:

(A) community values;

(B) recreational and park areas;

(C) historical and aesthetic values;

(D) environmental integrity;

(E) the probable improvement of service or lowering of cost to

consumers in the area if the certificate is granted; and

(F) to the extent applicable, the effect of granting the

certificate on the ability of this state to meet the goal

established by Section 39.904(a) of this title.

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

Amended by Acts 2003, 78th Leg., ch. 295, Sec. 2, eff. June 18,

2003.

Sec. 37.057. DEADLINE FOR APPLICATION FOR NEW TRANSMISSION

FACILITY. The commission may grant a certificate for a new

transmission facility to a qualified applicant that meets the

requirements of this subchapter. The commission must approve or

deny an application for a certificate for a new transmission

facility not later than the first anniversary of the date the

application is filed. If the commission does not approve or deny

the application on or before that date, a party may seek a writ

of mandamus in a district court of Travis County to compel the

commission to decide on the application.

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

Amended by:

Acts 2009, 81st Leg., R.S., Ch.

1170, Sec. 4, eff. June 19, 2009.

Sec. 37.059. REVOCATION OR AMENDMENT OF CERTIFICATE. (a) The

commission may revoke or amend a certificate after notice and

hearing if the commission finds that the certificate holder has

never provided or is no longer providing service in all or any

part of the certificated area.

(b) The commission may require one or more electric utilities to

provide service in an area affected by the revocation or

amendment of a certificate.

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

Sec. 37.060. DIVISION OF MULTIPLY CERTIFICATED SERVICE AREAS.

(a) This subsection and Subsections (b)-(g) apply only to areas

in which each retail electric utility that is authorized to

provide retail electric utility service to the area is providing

customer choice. For purposes of this subsection, an electric

cooperative or a municipally owned electric utility shall be

deemed to be providing customer choice if it has approved a

resolution adopting customer choice that is effective on January

1, 2002, or effective within 24 months after the date of the

resolution adopting customer choice. All other retail electric

utilities shall be deemed to be providing customer choice if

customer choice will be allowed for customers of the retail

electric utility on January 1, 2002. In areas in which each

certificated retail electric utility is providing customer

choice, the commission, if requested by a retail electric

utility, shall examine all areas within the service area of the

retail electric utility making the request that are also

certificated to one or more other retail electric utilities and,

after notice and hearing, shall amend the retail electric

utilities' certificates so that only one retail electric utility

is certificated to provide distribution services in any such

area. Only retail electric utilities certificated to serve an

area on June 1, 1999, may continue to serve the area or portion

of the area under an amended certificate issued under this

subsection.

(b) This section does not apply in any area in which a

municipally owned utility is certificated to provide retail

electric utility service if the municipally owned utility serving

the area files with the commission by October 1, 2001, a request

that areas within the certificated service area of the

municipally owned utility remain as presently certificated.

(c) The commission shall enter its order dividing multiply

certificated areas within one year of the date a request is

received.

(d) In amending certificates under this section, the commission

shall take into consideration the factors prescribed by Section

37.056.

(e) Notwithstanding Section 37.059, the commission shall revoke

certificates to the extent necessary to achieve the division of

retail electric service areas as provided by this section.

(f) Unless otherwise agreed by the affected retail electric

utilities, each retail electric utility shall be allowed to

continue to provide service to the location of

electricity-consuming facilities it is serving on the date an

application for division of the affected multiply certificated

service areas is filed. No customer located within the affected

multiply certificated service areas shall be permitted to switch

from one retail electric utility to another while an application

for division of the affected multiply certificated service areas

is pending.

(g) If on June 1, 1999, retail service is being provided in an

area by another retail electric utility with the written consent

of the retail electric utility certificated to serve the area,

that consent shall be filed with the commission. On notification

of that consent and a request by an affected retail electric

utility to amend the relevant certificates, the commission may

grant an exception or amend a retail electric utility's

certificate. This provision shall not be construed to limit the

commission's authority to grant exceptions or to amend a retail

electric utility's certificate, upon request and notification,

for areas to which retail service is being provided pursuant to

written consent granted after June 1, 1999.

(h) The commission may not grant an additional retail electric

utility certificate to serve an area if the effect of the grant

would cause the area to be multiply certificated unless the

commission finds that the certificate holders are not providing

service to any part of the area for which a certificate is sought

and are not capable of providing adequate service to the area in

accordance with applicable standards. However, neither this

subsection nor the deadline of June 1, 1999, provided by

Subsection (a) shall apply to any application for multiple

certification filed with the commission on or before February 1,

1999, and those applications may be processed in accordance with

applicable law in effect on the date the application was filed.

Applications for multiple certification filed with the commission

on or before February 1, 1999, may not be amended to expand the

area for which a certificate is sought except for contiguous

areas within municipalities that provide consent, as required by

Section 37.053(b), not later than June 1, 1999.

(i) Notwithstanding any other provision of this section, if

requested by a municipally owned utility, the commission shall

examine all areas within the municipally owned utility's service

area that are also certificated to one or more other retail

electric utilities and, after notice and hearing, may amend the

retail electric utilities' certificates so that only one retail

electric utility is certificated to provide distribution services

in the area, provided that:

(1) the application is filed with the commission within 12

months of the effective date of this provision and is limited to

single certification of the area within the municipality's

boundaries as of February 1, 1999;

(2) the commission preserves the right of an electric utility or

an electric cooperative to serve its existing customers,

including any property owned or leased by any customer; and

(3) the municipality is a member city of a municipal power

agency, as that term is used in Section 40.059.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 32, eff. Sept. 1,

1999. Amended by Acts 2001, 77th Leg., ch. 796, Sec. 1, eff. June

14, 2001.

Sec. 37.061. EXISTING SERVICE AREA AGREEMENTS. (a)

Notwithstanding any other provision of this title, the commission

shall allow a municipally owned utility to amend the service area

boundaries of its certificate if:

(1) the municipally owned utility was the holder of a

certificate as of January 1, 1999;

(2) the municipally owned utility has an agreement existing

before January 1, 1999, with a public utility serving the area

that the public utility will not contest an application to amend

the certificate to add municipal territory; and

(3) the area for which a certificate is requested is not

certificated to a retail electric utility that is not a party to

the agreement and that has not consented in writing to

certification of the area to the municipality.

(b) The commission may not amend the certificate of the public

utility serving the affected area based on the granting of a

certificate to the municipally owned utility.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 32, eff. Sept. 1,

1999.

SUBCHAPTER C. MUNICIPALITIES

Sec. 37.101. SERVICE IN ANNEXED OR INCORPORATED AREA. (a) If

an area is or will be included within a municipality as the

result of annexation, incorporation, or another reason, each

electric utility and each electric cooperative that holds or is

entitled to hold a certificate under this title to provide

service or operate a facility in the area before the inclusion

has the right to continue to provide the service or operate the

facility and extend service within the utility's or cooperative's

certificated area in the annexed or incorporated area under the

rights granted by the certificate and this title.

(b) Notwithstanding any other law, an electric utility has the

right to:

(1) continue and extend service within the utility's

certificated area; and

(2) use roads, streets, highways, alleys, and public property to

furnish retail electric utility service.

(c) The governing body of a municipality may require an electric

utility to relocate the utility's facility at the utility's

expense to permit the widening or straightening of a street by:

(1) giving the electric utility 30 days' notice; and

(2) specifying the new location for the facility along the

right-of-way of the street.

(d) This section does not:

(1) limit the power of a city, town, or village to incorporate

or of a municipality to extend its boundaries by annexation; or

(2) prohibit a municipality from levying a tax or other special

charge for the use of the streets as authorized by Section

182.025, Tax Code.

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

Amended by Acts 1999, 76th Leg., ch. 405, Sec. 33, eff. Sept. 1,

1999.

Sec. 37.102. GRANT OF CERTIFICATE FOR CERTAIN MUNICIPALITIES.

(a) If a municipal corporation offers retail electric utility

service in a municipality having a population of more than

135,000 that is located in a county having a population of more

than 1,500,000, the commission shall singly certificate areas in

the municipality's boundaries in which more than one electric

utility provides electric utility service.

(b) In singly certificating an area under Subsection (a), the

commission shall preserve the right of an electric utility to

serve the customers the electric utility was serving on June 17,

1983. This subsection does not apply to a customer at least

partially served by a nominal 69,000 volts system who gave notice

of termination to the utility servicing that customer before June

17, 1983.

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

SUBCHAPTER D. REGULATION OF SERVICES, AREAS, AND FACILITIES

Sec. 37.151. PROVISION OF SERVICE. Except as provided by this

section, Section 37.152, and Section 37.153, a certificate

holder, other than one granted a certificate under Section

37.051(d), shall:

(1) serve every consumer in the utility's certificated area; and

(2) provide continuous and adequate service in that area.

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

Amended by:

Acts 2009, 81st Leg., R.S., Ch.

1170, Sec. 4, eff. June 19, 2009.

Sec. 37.152. GROUNDS FOR REDUCTION OF SERVICE. (a) Unless the

commission issues a certificate that the present and future

convenience and necessity will not be adversely affected, a

certificate holder may not discontinue, reduce, or impair service

to any part of the holder's certificated service area except for:

(1) nonpayment of charges;

(2) nonuse; or

(3) another similar reason that occurs in the usual course of

business.

(b) A discontinuance, reduction, or impairment of service must

be in compliance with and subject to any condition or restriction

the commission prescribes.

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

Sec. 37.153. REQUIRED REFUSAL OF SERVICE. A certificate holder

shall refuse to serve a customer in the holder's certificated

area if the holder is prohibited from providing the service under

Section 212.012, 232.029, or 232.0291, Local Government Code.

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

Amended by:

Acts 2005, 79th Leg., Ch.

708, Sec. 13, eff. September 1, 2005.

Sec. 37.154. TRANSFER OF CERTIFICATE. (a) An electric utility

may sell, assign, or lease a certificate or a right obtained

under a certificate if the commission determines that the

purchaser, assignee, or lessee can provide adequate service.

(b) A sale, assignment, or lease of a certificate or a right is

subject to conditions the commission prescribes.

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

Sec. 37.155. APPLICATION OF CONTRACTS. A contract approved by

the commission between retail electric utilities that designates

areas and customers to be served by the utilities:

(1) is valid and enforceable; and

(2) shall be incorporated into the appropriate areas of

certification.

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

Sec. 37.156. INTERFERENCE WITH ANOTHER UTILITY. If an electric

utility constructing or extending the utility's lines, plant, or

system interferes or attempts to interfere with the operation of

a line, plant, or system of another utility, the commission by

order may:

(1) prohibit the construction or extension; or

(2) prescribe terms for locating the affected lines, plants, or

systems.

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

Sec. 37.157. MAPS. An electric utility shall file with the

commission one or more maps that show each utility facility and

that separately illustrate each utility facility for the

generation, transmission, or distribution of the utility's

services on a date the commission orders.

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