(a) Duties of electric utilities.
  (1) Each electric utility collecting funds for a nuclear decommissioning trust must assure that the nuclear decommissioning trust is managed so that the funds are secure and earn a reasonable return; and, that the funds provided from the utility’s cost of service, plus the amounts earned from investment of the funds, will be available at the time of decommissioning.
  (2) Each electric utility collecting funds for a nuclear decommissioning trust must place the funds in an external, irrevocable trust fund. The utility must appoint an institutional trustee and may appoint an investment manager(s). Unless otherwise specified in subsection (b) of this section, the Texas Trust Code controls the administration and management of the nuclear decommissioning trusts, except that the appointed trustee(s) need not be qualified to exercise trust powers in Texas.
  (3) The utility must retain the right to replace the trustee with or without cause. In appointing a trustee, the electric utility must have the following duties, which will be of a continuing nature:
    (A) A duty to determine whether the trustee’s fee schedule for administering the trust is reasonable, when compared to other institutional trustees rendering similar services, and meets the requirement of subsection (c)(2)(A) of this section;
    (B) A duty to investigate and determine whether the past administration of trusts by the trustee has been reasonable;
    (C) A duty to investigate and determine whether the financial stability and strength of the trustee is adequate;
    (D) A duty to investigate and determine whether the trustee has complied with the trust agreement and this section as it relates to trustees; and,
    (E) A duty to investigate any other factors which may bear on whether the trustee is suitable.
  (4) The utility must retain the right to replace the investment manager with or without cause. In appointing an investment manager, the utility must have the following duties, which will be of a continuing nature:
    (A) A duty to determine whether the investment manager’s fee schedule for investment management services is reasonable, when compared to other such managers, and meets the requirement of subsection (c)(2)(A) of this section;
    (B) A duty to investigate and determine whether the past performance of the investment manager in managing investments has been reasonable;
    (C) A duty to investigate and determine whether the financial stability and strength of the investment manager is adequate for purposes of liability;
    (D) A duty to investigate and determine whether the investment manager has complied with the investment management agreement and this section as it relates to investments; and,
    (E) A duty to investigate any other factors which may bear on whether the investment manager is suitable.
(b) Agreements between the electric utility and the institutional trustee or investment manager.
  (1) The utility must execute an agreement with the institutional trustee. The agreement must include the restrictions in subparagraphs (A) - (E) of this paragraph and may include additional restrictions on the trustee. An electric utility must not grant the trustee powers that are greater than those provided to trustees under the Texas Trust Code or that are inconsistent with the limitations of this section.
    (A) The interest earned on the corpus of the trust becomes part of the trust corpus. A trustee owes the same duties with regard to the interest earned on the corpus as are owed with regard to the corpus of the trust.
    (B) A trustee must have a continuing duty to review the trust portfolio for compliance with investment guidelines and governing regulations.
    (C) A trustee must not lend funds from the decommissioning trust with itself, its officers, or its directors.
    (D) A trustee must not invest or reinvest decommissioning trust funds in instruments issued by the trustee, except for time deposits, demand deposits, or money market accounts of the trustee. However, investments of a decommissioning trust may include mutual funds that contain securities issued by the trustee if the securities of the trustee constitute no more than five percent of the fair market value of the assets of such mutual funds at the time of the investment.
    (E) The agreement must comply with all applicable requirements of the Nuclear Regulatory Commission.
  (2) The utility must execute an agreement with the investment manager. (If the trustee performs investment management functions, the contractual provisions governing those functions must be included in either the trust agreement or a separate investment management agreement.) The agreement must include the restrictions set forth in subparagraphs (A) - (E) of this paragraph and may include additional restrictions on the manager. An electric utility must not grant the manager powers that are greater than those provided to trustees under the Texas Trust Code or that are inconsistent with the limitations of this section.
    (A) An investment manager must, in investing and reinvesting the funds in the trust, comply with subsection (c) of this section.
    (B) The interest earned on the corpus of the trust becomes part of the trust corpus. An investment manager owes the same duties with regard to the interest earned on the corpus as are owed with regard to the corpus of the trust.
    (C) An investment manager must have a continuing duty to review the trust portfolio to determine the appropriateness of the investments.
    (D) An investment manager must not invest funds from the decommissioning trust with itself, its officers, or its directors.
    (E) The agreement must comply with all applicable requirements of the Nuclear Regulatory Commission.
  (3) A copy of the trust agreement, any investment management agreement, and any amendments must be filed with the commission within 30 days after the execution or modification of the agreement, and copies provided to the commission’s Legal Division and Rate Regulation Division and the Office of Public Utility Counsel. All previously executed agreements and amendments must be filed within 30 days of the effective date of this section.
  (4) Within 90 days after the effective date of this section, a utility that is a party to a trust agreement or an investment management agreement that is not in compliance with this section must revise the agreement to comply with this section.
(c) Trust investments.
  (1) Investment portfolio goals. The funds should be invested consistent with the following goals. The utility may apply additional prudent investment goals to the funds so long as they are not inconsistent with the stated goals of this subsection.
    (A) The funds should be invested with a goal of earning a reasonable return commensurate with the need to preserve the value of the assets of the trusts.
    (B) In keeping with prudent investment practices, the portfolio of securities held in the decommissioning trust must be diversified to the extent reasonably feasible given the size of the trust.
    (C) Asset allocation and the acceptable risk level of the portfolio should take into account market conditions, the time horizon remaining before the commencement and completion of decommissioning, and the funding status of the trust. While maintaining an acceptable risk level consistent with the goal in subparagraph (A) of this paragraph, the investment emphasis when the remaining life of the liability, as defined in paragraph (2)(F)(iv) of this subsection, exceeds five years should be to maximize net long-term earnings. The investment emphasis in the remaining investment period of the trust should be on current income and the preservation of the fund’s assets.
    (D) In selecting investments, the impact of the investment on the portfolio’s volatility and expected return net of fees, commissions, expenses and taxes should be considered.
  (2) General requirements. The following requirements must apply to all decommissioning trusts. Where a utility has multiple trusts for a single generating unit, the restrictions contained in this subsection apply to all trusts in the aggregate for that generating unit. For purposes of this section, a commingled fund is defined as a professionally managed investment fund of fixed-income or equity securities established by an investment company regulated by the Securities Exchange Commission or a bank regulated by the Office of the Comptroller of the Currency.
    (A) Fees limitation. The total trustee and investment manager fees paid on an annual basis by the utility for the entire portfolio including commingled funds must not exceed 0.7% of the entire portfolio’s average annual balance.
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