A Certificate of Convenience and Necessity in Texas is a license from the Public Utility Commission (PUC) giving a utility the exclusive right to provide electric, water, sewer, or local telephone service in a defined geographic area. To obtain and keep one, an applicant must prove it can deliver reliable service, complete a formal public notice process, and then meet ongoing service and reporting duties for the life of the certificate. Operating without one is not an option for covered utilities: penalties accrue daily.
Who Must Hold a CCN
Whether you need a certificate depends on what you plan to provide and what kind of entity you are.
Electric Utilities
Under Chapter 37 of the Texas Utilities Code, an electric utility cannot provide service or build transmission infrastructure without a CCN from the PUC.1State of Texas. Texas Utilities Code Section 37.051 – Certificate Required The requirement applies to investor-owned utilities and transmission providers. Municipally owned utilities and electric cooperatives generally are not required to hold a CCN unless they opt into PUC regulation or want to serve inside another utility’s certificated territory.
Water and Sewer Utilities
Chapter 13 of the Texas Water Code requires any utility, water supply corporation, or affected county to obtain a CCN before providing retail water or sewer service.2State of Texas. Texas Water Code Chapter 13 – Water Rates and Services Municipalities and districts are exempt unless they want to serve customers inside someone else’s certificated area.3Public Utility Commission of Texas. FaucetFacts – Certificates of Convenience and Necessity
One narrow exception saves an existing water or sewer utility from filing for every small growth step. A new CCN is not needed for a minor extension into adjacent territory as long as the endpoint is within one-quarter mile of the certificated boundary and no other utility is serving or certificated for the area.4State of Texas. Texas Water Code Chapter 13 – Water Rates and Services
Telecommunications Providers
Anyone providing local exchange telephone service, basic local telecommunications service, or switched access service must hold one of three authorizations: a CCN, a certificate of operating authority, or a service provider certificate of operating authority.5State of Texas. Texas Utilities Code Chapter 54 – Certificates A full CCN under Chapter 54 mainly applies to legacy incumbent carriers with significant market presence. Competitive carriers usually operate under one of the lighter certificate types, which carry fewer regulatory obligations.
What the PUC Requires You to Prove
For every type of CCN, the applicant must show it has the financial, managerial, and technical capability to provide continuous and adequate service.2State of Texas. Texas Water Code Chapter 13 – Water Rates and Services That is the baseline. The industry-specific requirements sit on top of it.
Water applicants must also show they can deliver drinking water meeting state health standards and have access to an adequate supply. Sewer applicants must meet the Texas Commission on Environmental Quality’s design criteria for treatment plants. If the CCN would require building a physically separate water or sewer system, the applicant has to demonstrate that consolidating with a nearby existing utility is not economically feasible.2State of Texas. Texas Water Code Chapter 13 – Water Rates and Services
Electric utility applications are evaluated under Section 37.056, which brings in a wider set of factors: the adequacy of existing service, the need for additional service, the effect on nearby utilities, community values, environmental integrity, and whether the certificate would lower consumer costs.
For water and sewer CCNs, Section 13.246 tells the PUC to weigh several factors beyond applicant capability:
- Whether the area already receives adequate service from another provider.
- Whether landowners, tenants, or residents have actually requested service.
- How granting the certificate would affect nearby utilities.
- Whether the applicant can meet PUC standards given the area’s current and projected density and land use.
- Whether service from an adjacent utility would be more practical.
How to Apply
Applicants file detailed financial, technical, and managerial documentation with the PUC. Water and sewer applications include engineering reports with system capacity calculations, pressure analyses, and compliance data showing the proposed system meets TCEQ design standards. Electric applications include engineering plans, service area maps, and financial documentation projecting demand.
Public Notice
Notice is a real step, not a formality. For water and sewer CCN applications, the PUC’s rules require the applicant to mail notice to cities, districts, and neighboring utilities within two miles of the requested area, the county judge of each affected county, each groundwater conservation district in the area, and every owner of a tract of at least 25 acres inside the requested territory.6Legal Information Institute. 16 Texas Administrative Code 24.235 – Notice Requirements for Certificate of Convenience and Necessity Applications The applicant must also publish notice in a local newspaper once a week for two consecutive weeks.
Intervention and Timeline
Anyone who wants to challenge the application has 30 days from the mailing or publication of notice, whichever comes later, to file for intervention. Protested cases can be referred to the State Office of Administrative Hearings (SOAH) for a formal contested proceeding, adding months to the schedule. Uncontested applications may take several months. Contested cases can stretch beyond a year, especially when the PUC requests additional information or attaches conditions to approval.
Obligations After You’re Certified
A CCN carries duties that run for the life of the certificate.
Continuous and Adequate Service
A water or sewer CCN holder must serve every customer in its certificated area and provide continuous and adequate service throughout that territory.7Public Utility Commission of Texas. Rules and Guidance for Water and Sewer Utilities Service cannot be discontinued, reduced, or impaired unless the PUC determines that present and future needs will not be harmed. Routine business situations like customer nonpayment or nonuse are exceptions, but any reduction still has to follow conditions the PUC prescribes.2State of Texas. Texas Water Code Chapter 13 – Water Rates and Services If the PUC finds service in part of a certificated area is inadequate or substantially inferior to comparable areas, it can order specific improvements.
Annual Reporting
Every water and sewer utility holding a CCN, except those operated by affected counties, must file an annual service, financial, and normalized earnings report with the PUC by June 1 each year.8Legal Information Institute. 16 Texas Administrative Code 24.129 – Water and Sewer Utilities Annual Reports The report gives the PUC ongoing visibility into financial health and operational performance.
Changing or Transferring a CCN
Service areas expand, shrink, and change hands. Each change needs PUC approval.
Amendments
Expanding into new territory requires the same financial, managerial, and technical showing the PUC applies to original applications. Shrinking a service area is harder because the PUC has to be sure affected customers will not lose access. The public notice and intervention rules that apply to new applications apply to amendments too, so affected parties can push back.
Transfers
When a certificate holder sells, merges, or otherwise conveys service rights, the acquiring entity must show it can maintain reliable service. The PUC reviews the sale or transfer agreement, financial statements, and operational plans. For telecommunications utilities, procedure depends on the type of carrier. A utility that has elected under Chapter 58 of the Utilities Code must notify the PUC within 30 days after closing a sale, transfer, or merger involving at least 50% of the utility or facilities worth more than $10 million.9Legal Information Institute. 16 Texas Administrative Code 26.101 – Certificate of Convenience and Necessity Criteria Other carriers face a more traditional approval process before closing. The PUC may attach conditions to a transfer, such as requiring the buyer to honor existing service agreements or rate structures for a transition period.
When a CCN Can Be Denied or Revoked
An otherwise qualified applicant can still be denied if granting the certificate would create unnecessary duplication in an area another utility already covers adequately. Financial instability, technical deficiencies, and managerial problems are the most common denial grounds.
For existing certificates, the PUC can revoke a CCN when a utility fails to provide continuous and adequate service, becomes financially insolvent, or repeatedly violates state or federal regulations. Enforcement actions and improvement orders usually come first, giving a utility time to fix problems before revocation.
The PUC can also revoke or amend a CCN at any time, with notice and a hearing, if the holder consents in writing or if the agency finds the holder has never provided service, is no longer providing service, is incapable of providing service, or has failed to provide continuous and adequate service in all or part of the area.10State of Texas. Texas Water Code Section 13.254 – Decertification Initiated by Utility Commission or Utility; Expedited Release Initiated by Landowner
Landowner Release
Landowners have their own escape valve. Under Section 13.2541 of the Water Code, a landowner can petition for expedited release from a water or sewer CCN if the landowner owns at least 25 acres, the property is not currently receiving service, and the county meets certain population thresholds (generally counties with at least 1.2 million residents or counties adjacent to them).11State of Texas. Texas Water Code Section 13.2541 – Streamlined Expedited Release Initiated by Landowner When the criteria are met, the PUC must grant the petition within 60 days. A landowner can agree to pay the utility an amount equal to what is needed to pay off or defease any federal loan the utility holds. Senate Bill 1413, effective September 1, 2025, clarified these payment mechanisms and authorized the PUC to order a utility to accept a loan payoff under this process.
Penalties for Operating Without a CCN
Providing utility service without proper authorization triggers administrative penalties that add up fast. For electric utilities, the general penalty under Section 15.023 of the Utilities Code is up to $25,000 per violation per day, and each day counts as a separate offense.12State of Texas. Texas Utilities Code Section 15.023 – Administrative Penalty, Disgorgement Order, or Mitigation Plan Certain violations tied to wholesale reliability standards or voluntary mitigation plans carry penalties up to $1,000,000 per violation per day. For water and sewer utilities, the PUC can pursue similar administrative penalties and can issue cease-and-desist orders to stop unauthorized service immediately.
Appealing a PUC Decision
A denial, revocation, or unfavorable amendment can be challenged, but the path runs through the agency first.
Contested cases are referred to SOAH, which functions as an independent tribunal. Proceedings resemble a courtroom trial, with sworn testimony, documents, and cross-examination. The administrative law judge issues a proposal for decision, and the PUC’s commissioners accept, modify, or reject it. A party dissatisfied with the final order must file a motion for rehearing with the PUC before going to court.
After administrative remedies are exhausted, a party can file a petition for judicial review in a Travis County district court under Chapter 2001 of the Texas Government Code.13State of Texas. Texas Government Code Section 2001.171 – Judicial Review The court’s review is narrow. It does not retry the case or substitute its judgment for the PUC’s. It examines whether the agency acted within its legal authority and whether substantial evidence supports the decision. If the court finds the action was arbitrary, unlawful, or unsupported by the record, it can remand the case for reconsideration or overturn the decision entirely.