BILL ANALYSIS

C.S.H.B. 2771

By: Smithee

State Affairs

Committee Report (Substituted)

BACKGROUND AND PURPOSE

In 2017, the Texas Legislature overwhelmingly passed S.B. 586, which established a program to ensure that the Public Utility Commission of Texas (PUC) would have an efficient, needs-based process to review, set, and adjust Texas Universal Service Fund (TUSF) high-cost support for the small and rural incumbent communications providers in Texas. The provisions added by S.B. 586 were set by the legislature to expire September 1, 2023, originally so that there would be an opportunity to further examine and, if necessary, make changes to the review and adjustment process. The current methodology has allowed the PUC to scrutinize small providers' regulated operations, expenses, and revenues annually and to periodically adjust their TUSF high-cost support based on their demonstrated need without burdening PUC staff by filing numerous rate cases. If the current statute expires, the PUC would lose the detailed annual reporting that provides the most powerful tool for oversight of small providers and cause small providers to lose most of their TUSF high-cost support less than a year after it was finally restored by the courts after a dispute with the PUC. Because the small carriers would under-earn, they would have to file individual rate cases at the PUC, which would be used to reestablish proper levels of TUSF support through a process that is burdensome and expensive for all parties. C.S.H.B. 2771 seeks to prevent this by extending the expiration of these provisions to September 1, 2033.

CRIMINAL JUSTICE IMPACT

It is the committee's opinion that this bill does not expressly create a criminal offense, increase the punishment for an existing criminal offense or category of offenses, or change the eligibility of a person for community supervision, parole, or mandatory supervision.

RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency, or institution.

ANALYSIS

C.S.H.B. 2771 amends the Utilities Code to postpone the expiration of certain provisions relating to the disbursement of support from the Texas Universal Service Fund (TUSF) for certain small and rural local exchange companies or cooperatives and any monthly amounts approved under those provisions from September 1, 2023, to September 1, 2033. The bill requires an applicable small provider that submits a request for a determination and disbursement of support from the TUSF under a mechanism which permits the provider the opportunity to earn a reasonable return to file annually with the Public Utility Commission of Texas (PUC), in addition to the annual report currently required under state law, a report that includes the following information regarding the provider's operations that are regulated by the PUC:

· total operating revenues;

· total operating expenses;

· total operating tax expense;

· rate of return;

· total invested capital; and

· network access revenue.

The bill requires the provider to file the additional report using the PUC's public filing system and excludes information in the report from information considered confidential and exempt from public disclosure.

EFFECTIVE DATE

On passage, or, if the bill does not receive the necessary vote, September 1, 2023.

COMPARISON OF INTRODUCED AND SUBSTITUTE

While C.S.H.B. 2771 may differ from the introduced in minor or nonsubstantive ways, the following summarizes the substantial differences between the introduced and committee substitute versions of the bill.

Whereas the introduced postponed the expiration of the applicable provisions until September 1, 2035, the substitute postpones their expiration instead until September 1, 2033. Moreover, the substitute includes provisions that were not in the introduced requiring the filing of an additional annual report by certain small providers requesting a determination and  distribution of support from the TUSF under a mechanism that permits the provider an opportunity to earn a reasonable return and relating to the confidentiality of such a report.