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Summary of Legislation: HB 1160 would require agencies with authority over Certificates of Convenience and Necessity (CCN) for water and sewage service to transfer the CCN to a municipality if the municipality is “willing” to provide water and sewage service and has introduced a condemnation proceeding against the public utility. The bill's provisions apply only to a condemnation proceeding in which the petition is filed on or after September 1, 2011.
Analysis: This bill is bracketed for Blue Mound Texas in Tarrant County only. Monarch Utilities holds a CCN which grants a monopoly over the water distribution and sewage market in Blue Mound Texas. The utility not obligated to do anything other than provide adequate and contiguous service (within the health and safety standards of the state). The bill’s author notes that Texas Water code Chapter 13 prohibits the issuance of multiple CCNs in their area so there is no opportunity for a competitive market even if the municipality had the capability of meeting minimum state obligations governing water and sewage services.
Concerns: Blue Mound, Texas has attempted and failed to negotiate the purchase the utility several times. It appears that the municipality’s move to condemn and exercise eminent domain is based on its failure to negotiate a transaction that is satisfactory to the utility owners. This is not an adequate reason to exercise eminent domain. Article 1 section 17 of the Texas Constitution states “No person's property shall be taken, damaged or destroyed for or applied to public use without adequate compensation being made”. Monarch Utilities has invested significantly in infrastructure and property; the resulting condemnation would result in a substantial loss to the private company. While we oppose the excessive use of eminent domain, this legislation does not directly address the condemnation proceeding that is working its way through the judicial system. Unfortunately, the bill puts the cart before the horse by requiring the CCN to be transferred to the municipality before a final judgment has been made on the condemnation issue. This presupposes the outcome of a pending legal case.
Recommendation: HB 1160 in its present form is premature. Because the possibility remains that the court will side with the utility and reject the eminent domain action, the CCN should not be transferred to the municipality. We recommend that legislators oppose this bill unless amended to require the transfer of the CCN only after a final judgment has been made in favor of the municipality’s exercise of eminent domain. Should such an amendment be adopted, we would favor final passage of the bill.
UPDATE: TPPA Now Supports HB 1160
In our original analysis we recommended legislators oppose HB 1160 unless an amendment was adopted changing the Certificates of Convenience and Necessity (CCN) transfer provision so that the transfer only happens if a municipality's eminent domain action is successful.
An amendment of this nature was adopted by the House on the morning of April 23. This amendment will prevent a CCN from being transferred prematurely before the eminent domain action has been fully adjudicated.
We support HB 1160 as amended and congratulate Rep. Geren on successfully working with his colleagues to find common ground on this important issue.