HB1318

HB1318 revises compensation and property-transfer rules in a specific process for giving a municipal or city-franchised utility the sole water or sewer service certificate in an incorporated or annexed area. It applies to proceedings begun on or after September 1, 2025; earlier proceedings remain under prior law. A service certificate authorizes service in a territory—it is not itself ownership of another utility’s pipes or land. Final law

The law removes language requiring compensation and transfer for property deemed “useless or valueless” because of the new sole certification. It instead describes compensation for property actually transferred and damage or adverse effects on property the existing utility retains. When a municipality applies on behalf of a franchised utility, that utility must make the court-ordered payments for both categories. This is not a declaration that utilities lose all compensation rights.

A Public Utility Commission order alone does not transfer property: a court judgment is required. The existing 30-day court-appeal route and new trial of the issues remain. Sole certification generally becomes effective upon the required compensation payment or deposit; if the final judgment awards no compensation, it becomes effective when that judgment is final. Possession pending appeal remains subject to the judgment’s payment/deposit requirement and additional security for a larger award.

For damage to retained property on appeal, the court or jury may consider only the factors in Water Code 13.255(g). Those include debt and ability to repay it, facility value, allocable expenditures and contracts, effects on remaining customers, lost revenue from existing customers, reasonable legal/professional expenses and financial integrity. The provision itself also includes “other relevant factors”; the new restriction should not be described as a closed checklist of only the named items. Real-property valuation remains tied to eminent-domain standards. The overall process has existing limits: it covers specified nonprofit water/sewer corporations and districts, plus a separate category of utilities wholly within a city of at least 1.7 million people, with additional conditions for that category. Water Code 13.255, including (g), (j) and (k)