By: Stiles H.B. No. 1209
73R2945 DWS-F
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to components of net income used in establishing rates of
1-3 a gas utility.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Section 5.06, Gas Utility Regulatory Act (Article
1-6 1446e, Vernon's Texas Civil Statutes), is amended to read as
1-7 follows:
1-8 Sec. 5.06. Components of Net Income. (a) The components of
1-9 net income used to establish just and reasonable rates shall be
1-10 determined in accordance with this section.
1-11 (b) "Net income" means the total revenues of the gas utility
1-12 from gas utility service less all reasonable and necessary expenses
1-13 related to that gas utility service as determined by the regulatory
1-14 authority. The regulatory authority shall determine those expenses
1-15 and revenues in a manner consistent with Subsections (c)-(e)
1-16 <(b)-(d)> of this section.
1-17 (c) <(b)> Payment to affiliated interests for costs of any
1-18 services, or any property, right, or thing, or for interest expense
1-19 may not be used to establish just and reasonable rates for gas
1-20 utility service <allowed> either as capital costs or as expense
1-21 related to gas utility service except to the extent that the
1-22 regulatory authority shall find such payment to be reasonable and
1-23 necessary for each item or class of items as determined by the
1-24 regulatory authority <railroad commission>. Any such finding shall
2-1 include specific findings of the reasonableness and necessity of
2-2 each item or class of items included in the establishment of the
2-3 rates <allowed> and a finding that the price to the gas utility is
2-4 no higher than prices charged by the supplying affiliate to its
2-5 other affiliates or divisions for the same item or class of items,
2-6 or to unaffiliated persons or corporations.
2-7 (d) If an expense is allowed to be included in utility
2-8 rates, or an investment is included in the utility rate base, the
2-9 related income tax deduction or benefit shall be included in the
2-10 computation of income tax expense to reduce the rates. If an
2-11 expense is disallowed or not included in utility rates, or an
2-12 investment is not included in the utility rate base, the related
2-13 income tax deduction or benefit may not be included in the
2-14 computation of income tax expense to reduce the rates. The income
2-15 tax expense shall be computed using the statutory income tax rates.
2-16 <(c) If the gas utility is a member of an affiliated group
2-17 that is eligible to file a consolidated income tax return, and if
2-18 it is advantageous to the gas utility to do so, income taxes shall
2-19 be computed as though a consolidated return had been so filed and
2-20 the utility had realized its fair share of the savings resulting
2-21 from the consolidated return, unless it is shown to the
2-22 satisfaction of the regulatory authority that it was reasonable to
2-23 choose not to consolidate returns. The amounts of income taxes
2-24 saved by a consolidated group of which a gas utility is a member by
2-25 reason of the elimination in the consolidated return of the
2-26 intercompany profit on purchases by the gas utility from an
2-27 affiliate shall be applied to reduce the cost of the property or
3-1 services so purchased. The investment tax credit allowed against
3-2 federal income taxes, to the extent retained by the utility, shall
3-3 be applied as a reduction in the rate based contribution of the
3-4 assets to which the credit applies, to the extent and at the rate
3-5 allowed by the Internal Revenue Code.>
3-6 (e) <(d)> The regulatory authority may promulgate reasonable
3-7 rules and regulations complying with this section with respect to
3-8 including and not including <the allowance or disallowance of>
3-9 certain expenses in the computation of the rates to be established
3-10 <for ratemaking purposes>.
3-11 SECTION 2. This Act applies only to a rate proceeding for
3-12 which the statement of intent is filed on or after the effective
3-13 date of this Act and to any appeal of that proceeding. A
3-14 proceeding for which the statement of intent is filed before the
3-15 effective date of this Act or an appeal of that proceeding is
3-16 governed by the law in effect when the statement of intent was
3-17 filed, and that law is continued in effect for that purpose.
3-18 SECTION 3. The importance of this legislation and the
3-19 crowded condition of the calendars in both houses create an
3-20 emergency and an imperative public necessity that the
3-21 constitutional rule requiring bills to be read on three several
3-22 days in each house be suspended, and this rule is hereby suspended,
3-23 and that this Act take effect and be in force from and after its
3-24 passage, and it is so enacted.