RATES AND CHARGES

(a) In contracting with a public or private entity for wastewater collection, transmission, treatment, or disposal services or for water conservation, storage, transportation, treatment, or distribution, a public utility agency must charge rates sufficient to produce revenue adequate to: (1) pay all expenses of operation and maintenance; (2) pay when due the principal of and interest on obligations issued under this subchapter; (3) pay the principal of and interest on any legal debt of the agency; (4) pay when due all sinking and reserve fund payments; and (5) fulfill any agreements made with the holders of any obligations. (b) A public utility agency may also establish a reasonable depreciation and emergency fund. (c) Payments made under a contract with a public utility agency constitute an operating expense of the public or private entity served under the contract, unless otherwise prohibited by a previously outstanding obligation of the purchasing entity. (d) Notwithstanding Subsection (a), the Public Utility Commission of Texas has appellate jurisdiction over the rates and charges of a public utility agency in the manner provided by Section 13.043, Water Code. (e) This state pledges to and agrees with the purchasers and successive holders of obligations issued under this subchapter that in any appeal proceeding regarding the public utility agency conducted under Section 13.043, Water Code, the Public Utility Commission of Texas will establish rates and charges that will produce revenue sufficient to pay for those items specified in Subsections (a) and (b) and any other obligations of the agency in connection with those items.