By: Bailey H.B. No. 185
73R1721 DWS-D
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to prohibition of consideration of charitable
1-3 contributions in setting a utility's rates.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Section 41, Public Utility Regulatory Act
1-6 (Article 1446c, Vernon's Texas Civil Statutes), is amended to read
1-7 as follows:
1-8 Sec. 41. COMPONENTS OF INVESTED CAPITAL AND NET INCOME. The
1-9 components of invested capital and net income shall be determined
1-10 according to the following rules:
1-11 (a) Invested Capital. Utility rates shall be based upon the
1-12 original cost of property used by and useful to the public utility
1-13 in providing service including construction work in progress at
1-14 cost as recorded on the books of the utility. The inclusion of
1-15 construction work in progress is an exceptional form of rate relief
1-16 to be granted only upon the demonstration by the utility that such
1-17 inclusion is necessary to the financial integrity of the utility.
1-18 Construction work in progress shall not be included in the rate
1-19 base for major projects under construction to the extent that such
1-20 projects have been inefficiently or imprudently planned or managed.
1-21 Original cost shall be the actual money cost, or the actual money
1-22 value of any consideration paid other than money, of the property
1-23 at the time it shall have been dedicated to public use, whether by
1-24 the utility which is the present owner or by a predecessor, less
2-1 depreciation.
2-2 (b) Separations and Allocations. Costs of facilities,
2-3 revenues, expenses, taxes, and reserves shall be separated or
2-4 allocated as prescribed by the regulatory authority.
2-5 (c) Net Income. By "net income" is meant the total revenues
2-6 of the public utility less all reasonable and necessary expenses as
2-7 determined by the regulatory authority. The regulatory authority
2-8 shall determine expenses and revenues in a manner consistent with
2-9 the following:
2-10 (1) Transactions with Affiliated Interests. Payment
2-11 to affiliated interests for costs of any services, or any property,
2-12 right or thing, or for interest expense shall not be allowed either
2-13 as capital cost or as expense except to the extent that the
2-14 regulatory authority shall find such payment to be reasonable and
2-15 necessary for each item or class of items as determined by the
2-16 commission. Any such finding shall include specific findings of
2-17 the reasonableness and necessity of each item or class of items
2-18 allowed and a finding that the price to the utility is no higher
2-19 than prices charged by the supplying affiliate to its other
2-20 affiliates or divisions for the same item or class of items, or to
2-21 unaffiliated persons or corporations. The price paid by gas
2-22 utilities to affiliated interests for natural gas from Outer
2-23 Continental Shelf lands shall be subject to a rebuttable
2-24 presumption that such price is reasonable if the price paid does
2-25 not exceed the price permitted by federal regulation if such gas is
2-26 regulated by any federal agency or if not regulated by a federal
2-27 agency does not exceed the price paid by nonaffiliated parties for
3-1 natural gas from Outer Continental Shelf lands. The burden of
3-2 establishing that such a price paid is not reasonable shall be on
3-3 any party challenging the reasonableness of such price.
3-4 (2) Income Taxes. If the public utility is a member
3-5 of an affiliated group that is eligible to file a consolidated
3-6 income tax return, and if it is advantageous to the public utility
3-7 to do so, income taxes shall be computed as though a consolidated
3-8 return had been so filed and the utility had realized its fair
3-9 share of the savings resulting from the consolidated return, unless
3-10 it is shown to the satisfaction of the regulatory authority that it
3-11 was reasonable to choose not to consolidate returns. The amounts
3-12 of income taxes saved by a consolidated group of which a public
3-13 utility is a member by reason of the elimination in the
3-14 consolidated return of the intercompany profit on purchases by the
3-15 public utility from an affiliate shall be applied to reduce the
3-16 cost of the property or services so purchased. The investment tax
3-17 credit allowed against federal income taxes, to the extent retained
3-18 by the utility, shall be applied as a reduction in the rate based
3-19 contribution of the assets to which such credit applies, to the
3-20 extent and at such rate as allowed by the Internal Revenue Code.
3-21 (3) Expenses Disallowed. The regulatory authority
3-22 shall not consider for ratemaking purposes the following expenses:
3-23 (A) legislative advocacy expenses, whether made
3-24 directly or indirectly, including but not limited to legislative
3-25 advocacy expenses included in trade association dues;
3-26 (B) payments, except those made under an
3-27 insurance or risk-sharing arrangement executed before the date of
4-1 loss, made to cover costs of an accident, equipment failure, or
4-2 negligence at a utility facility owned by a person or governmental
4-3 body not selling power inside the State of Texas;
4-4 (C) Costs of processing a refund or credit under
4-5 Subsection (e) of Section 43 of this Act; <or>
4-6 (D) any expenditure found by the regulatory
4-7 authority to be unreasonable, unnecessary, or not in the public
4-8 interest, including but not limited to executive salaries,
4-9 advertising expenses, legal expenses, and civil penalties or fines;
4-10 or
4-11 (E) charitable contributions.
4-12 The regulatory authority may promulgate reasonable rules and
4-13 regulations with respect to the allowance or disallowance of any
4-14 expenses for ratemaking purposes.
4-15 SECTION 2. This Act applies only to a rate proceeding for
4-16 which the statement of intent is filed on or after the effective
4-17 date of this Act.
4-18 SECTION 3. The importance of this legislation and the
4-19 crowded condition of the calendars in both houses create an
4-20 emergency and an imperative public necessity that the
4-21 constitutional rule requiring bills to be read on three several
4-22 days in each house be suspended, and this rule is hereby suspended,
4-23 and that this Act take effect and be in force from and after its
4-24 passage, and it is so enacted.