(a) The water utility improvement account is created outside of the state treasury.
(b) A civil or administrative penalty payable to the state that is collected from a utility for a violation of this subchapter shall be deposited in the account.

(c) The comptroller shall manage the account for the benefit of the commission and shall invest the money and deposit interest and other investment proceeds in the account. The comptroller shall release money from the account in the manner provided by the commission. Money in the account may be used only for:
(1) capital improvements to the water or sewer system of a utility that has paid fines or penalties under this chapter or under Chapter 13, Water Code, that have been deposited in the account; or
(2) capital improvements and operating and maintenance expenses for a utility placed in receivership or under a temporary manager under § 13.4132, Water Code.
(d) Money used under Subsection (c)(1) for a utility’s system may not exceed the amount of the civil or administrative penalties the utility has paid. Capital improvements made with money from the account may not be considered as invested capital of the utility for any purpose. If the utility is sold to another owner, a portion of the sales price equivalent to the percentage of the used and useful facilities that were constructed with money under Subsection (c)(1) shall be immediately distributed equally to the current customers of the utility.
(e) Money used under Subsection (c)(2) may not be considered as invested capital of the utility for any purpose.
(f) In this section, “utility” has the meaning assigned by § 13.002, Water Code.