BILL ANALYSIS

Senate Research Center	S.B. 1016
	By: King
	Business & Commerce
	4/28/2023
	Enrolled

AUTHOR'S / SPONSOR'S STATEMENT OF INTENT

In 2019, the Texas Legislature passed a law, H.B. 1767 (which passed the Senate 30-1), that directed the Railroad Commission of Texas to presume as reasonable when establishing a gas utility's rates the total compensation paid to the gas utility's employees as long as that pay is consistent with recent market compensation studies.  The presumption of reasonableness applies only to employees such as front-line workers, support personnel, and back-office support.  The presumption of reasonableness does not apply to named executive officers of the gas utility.  Importantly, H.B. 1767 does not allow for the recovery of one-time or supplemental bonus payments to employees or executives.

H.B. 1767 was aimed at reducing litigation in gas utility rate cases at the Railroad Commission of Texas over how gas utility employees are paid (that is, what company goals might affect a portion of employee compensation), and not how much they are paid, which is rarely litigated.  H.B. 1767 has had the desired effect of reducing litigation at the Railroad Commission over how gas utility employees are paid. 

Similar to H.B. 1767, S.B. 1016 is aimed at reducing litigation in electric utility cases at the Public Utility Commission of Texas over how electric utility employees are paid.  S.B. 1016 would direct the Public Utility Commission of Texas to presume as reasonable when establishing an electric utility's rates, the total compensation paid to the electric utility's employees as long as that pay is consistent with recent market compensation studies.  Total compensation, defined as "employee compensation benefits," includes base salaries, wages, incentive compensation, and benefits.  Total compensation does not include pensions, other postemployment benefits, or incentive compensation for officers of an electric utility related to attaining financial metrics or attaining metrics that are adverse to customers, as determined by the Public Utility Commission of Texas.

S.B. 1016 amends current law relating to the consideration of employee compensation and benefits in establishing the rates of electric utilities.

RULEMAKING AUTHORITY

This bill does not expressly grant any additional rulemaking authority to a state officer, institution, or agency.

SECTION BY SECTION ANALYSIS

SECTION 1. Amends Subchapter B, Chapter 36, Utilities Code, by adding Section 36.067, as follows:

Sec. 36.067. CONSIDERATION OF COMPENSATION AND BENEFIT EXPENSES. (a) Provides that "employee compensation and benefits" in this section includes base salaries, wages, incentive compensation, and benefits. Provides that the term does not include:

(1) pension or other postemployment benefits; and

(2) incentive compensation for an officer of an electric utility related to attaining:

(A) financial metrics; or

(B) metrics adverse to customers' interests as determined by the Public Utility Commission of Texas.

(b) Requires the regulatory authority, when establishing an electric utility's rates, to presume that employee compensation and benefits expenses are reasonable and necessary if the expenses are consistent with market compensation studies issued not earlier than three years before the initiation of the proceeding to establish the rates.

SECTION 2. (a) Provides that Section 36.067, Utilities Code, as added by this Act, applies only to a proceeding for the establishment of rates for which the regulatory authority has not issued a final order or decision before the effective date of this Act.

(b) Provides that a proceeding for which the regulatory authority has issued a final order or decision before the effective date of this Act is governed by the law in effect immediately before that date, and that law is continued in effect for that purpose.

SECTION 3. Effective date: upon passage or September 1, 2023.