S.B. No. 421
                                        AN ACT
    1-1  relating to the rates of a gas utility.
    1-2        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
    1-3        SECTION 1.  Subsection (e), Section 3.05, Gas Utility
    1-4  Regulatory Act (Article 1446e, Vernon's Texas Civil Statutes), is
    1-5  amended to read as follows:
    1-6        (e)  The railroad commission shall hear the appeal de novo
    1-7  based on the test year presented to the municipality, adjusted for
    1-8  known changes and conditions that are measurable with reasonable
    1-9  accuracy, and by its final order, which shall be entered not more
   1-10  than 210 <185> days from the date the appeal is perfected, the
   1-11  railroad commission shall fix such rates that the municipality
   1-12  should have fixed in the ordinance from which the appeal was taken.
   1-13  In the event that the railroad commission fails to enter its final
   1-14  order within 210 <185> days from the date the appeal is perfected,
   1-15  the schedule of rates proposed by the utility shall be deemed to
   1-16  have been approved by the commission and effective upon the
   1-17  expiration of the 210-day <185-day> period.  Any rates, whether
   1-18  temporary or permanent, set by the railroad commission shall be
   1-19  prospective and observed from and after the applicable order of the
   1-20  railroad commission.  However, <except> interim <rate> orders
   1-21  establishing temporary rates necessary to provide the utility the
   1-22  opportunity to avoid confiscation during the 210-day period may be
   1-23  made effective <beginning> on the date of filing of the <a>
    2-1  petition for review with the railroad commission <and ending on the
    2-2  date of a final order setting rates>.  The railroad commission may
    2-3  order a refund with interest of amounts collected under temporary
    2-4  rates through a payment to customers from whom those amounts were
    2-5  collected or through a payment or credit to each affected class of
    2-6  customers.
    2-7        SECTION 2.  Section 5.06, Gas Utility Regulatory Act (Article
    2-8  1446e, Vernon's Texas Civil Statutes), is amended to read as
    2-9  follows:
   2-10        Sec. 5.06.  Components of Net Income.  (a)  The components of
   2-11  net income used to establish just and reasonable rates shall be
   2-12  determined in accordance with this section.
   2-13        (b)  "Net income" means the total revenues of the gas utility
   2-14  from gas utility service less all reasonable and necessary expenses
   2-15  related to that gas utility service as determined by the regulatory
   2-16  authority.  The regulatory authority shall determine those expenses
   2-17  and revenues in a manner consistent with Subsections (c)-(e)
   2-18  <(b)-(d)> of this section.
   2-19        (c) <(b)>  Payment to affiliated interests for costs of any
   2-20  services, or any property, right, or thing, or for interest expense
   2-21  may not be used to establish just and reasonable rates for gas
   2-22  utility service <allowed> either as capital costs or as expense
   2-23  related to gas utility service except to the extent that the
   2-24  regulatory authority shall find such payment to be reasonable and
   2-25  necessary for each item or class of items as determined by the
    3-1  regulatory authority <railroad commission>.  Any such finding shall
    3-2  include specific findings of the reasonableness and necessity of
    3-3  each item or class of items included in the establishment of the
    3-4  rates <allowed> and a finding that the price to the gas utility is
    3-5  no higher than prices charged by the supplying affiliate to its
    3-6  other affiliates or divisions for the same item or class of items,
    3-7  or to unaffiliated persons or corporations.
    3-8        (d)  If an expense is allowed to be included in utility rates
    3-9  or an investment is included in the utility rate base, the related
   3-10  income tax deduction or benefit shall be included in the
   3-11  computation of income tax expense to reduce the rates.  If an
   3-12  expense is disallowed or not included in utility rates or an
   3-13  investment is not included in the utility rate base, the related
   3-14  income tax deduction or benefit may not be included in the
   3-15  computation of income tax expense to reduce the rates.  The income
   3-16  tax expense shall be computed using the statutory income tax rates.
   3-17  This subsection expires September 1, 1995.
   3-18        (e) <(c)  If the gas utility is a member of an affiliated
   3-19  group that is eligible to file a consolidated income tax return,
   3-20  and if it is advantageous to the gas utility to do so, income taxes
   3-21  shall be computed as though a consolidated return had been so filed
   3-22  and the utility had realized its fair share of the savings
   3-23  resulting from the consolidated return, unless it is shown to the
   3-24  satisfaction of the regulatory authority that it was reasonable to
   3-25  choose not to consolidate returns.  The amounts of income taxes
    4-1  saved by a consolidated group of which a gas utility is a member by
    4-2  reason of the elimination in the consolidated return of the
    4-3  intercompany profit on purchases by the gas utility from an
    4-4  affiliate shall be applied to reduce the cost of the property or
    4-5  services so purchased.  The investment tax credit allowed against
    4-6  federal income taxes, to the extent retained by the utility, shall
    4-7  be applied as a reduction in the rate based contribution of the
    4-8  assets to which the credit applies, to the extent and at the rate
    4-9  allowed by the Internal Revenue Code.>
   4-10        <(d)>  The regulatory authority may promulgate reasonable
   4-11  rules and regulations complying with this section with respect to
   4-12  including and not including <the allowance or disallowance of>
   4-13  certain expenses in the computation of the rates to be established
   4-14  <for ratemaking purposes>.
   4-15        SECTION 3.  Subsection (a), Section 5.08, Gas Utility
   4-16  Regulatory Act (Article 1446e, Vernon's Texas Civil Statutes), is
   4-17  amended to read as follows:
   4-18        (a)  No utility may increase its rates except by filing a
   4-19  statement of intent with the regulatory authority having original
   4-20  jurisdiction at least 35 days prior to the effective date of the
   4-21  proposed increase.  The statement of intent shall include proposed
   4-22  revisions of tariffs and schedules and a statement specifying in
   4-23  detail each proposed increase, the effect the proposed increase is
   4-24  expected to have on the revenues of the company, the classes and
   4-25  numbers of utility consumers affected, and other information
    5-1  required by the regulatory authority's rules and regulations.  A
    5-2  copy of the statement shall be mailed or delivered at the time of
    5-3  filing to the appropriate officer of each affected municipality.
    5-4  Notice<, and notice> shall also be given by publication of a notice
    5-5  to the public in conspicuous form and place <by placing a notice to
    5-6  the public of the proposed increase once in each week for four
    5-7  successive weeks> in a newspaper having general circulation in each
    5-8  county containing territory affected by the proposed increase.  The
    5-9  notice shall be published for four successive weeks before the
   5-10  effective date of the proposed increase.  In addition to newspaper
   5-11  publication, the utility shall deliver notice of the proposed
   5-12  increase to all affected utility customers by mail or bill insert
   5-13  before the effective date of the proposed increase.  Notice shall
   5-14  also be given by delivery of notice <and> to such other affected
   5-15  persons as required by the regulatory authority's rules and
   5-16  regulations.  The <However, notwithstanding the above, instead of
   5-17  the> publication of newspaper notice is not required <contemplated
   5-18  above, a gas utility may provide notice to the public> in areas
   5-19  outside the limits of the municipalities<,> and within the limits
   5-20  of municipalities with a population of less than 2,500 according to
   5-21  the most recent federal census <by mailing such notice by United
   5-22  States mail, postage prepaid, to the billing address of each
   5-23  directly affected customer, or by including the notice in such
   5-24  customer's bill in a conspicuous form>.
   5-25        SECTION 4.  Effective September 1, 1995, Section 5.06, Gas
    6-1  Utility Regulatory Act (Article 1446e, Vernon's Texas Civil
    6-2  Statutes), as amended by Section 2 of this Act, is amended to read
    6-3  as follows:
    6-4        Sec. 5.06.  Components of Net Income.  (a)  The components of
    6-5  net income used to establish just and reasonable rates shall be
    6-6  determined in accordance with this section.
    6-7        (b)  "Net income" means the total revenues of the gas utility
    6-8  from gas utility service less all reasonable and necessary expenses
    6-9  related to that gas utility service as determined by the regulatory
   6-10  authority.  The regulatory authority shall determine those expenses
   6-11  and revenues in a manner consistent with Subsections (c)-(e) of
   6-12  this section.
   6-13        (c)  Payment to affiliated interests for costs of any
   6-14  services, or any property, right, or thing, or for interest expense
   6-15  may not be used to establish just and reasonable rates for gas
   6-16  utility service either as capital costs or as expense related to
   6-17  gas utility service except to the extent that the regulatory
   6-18  authority shall find such payment to be reasonable and necessary
   6-19  for each item or class of items as determined by the regulatory
   6-20  authority.  Any such finding shall include specific findings of the
   6-21  reasonableness and necessity of each item or class of items
   6-22  included in the establishment of the rates and a finding that the
   6-23  price to the gas utility is no higher than prices charged by the
   6-24  supplying affiliate to its other affiliates or divisions for the
   6-25  same item or class of items, or to unaffiliated persons or
    7-1  corporations.
    7-2        (d)  If the gas utility is a member of an affiliated group
    7-3  that is eligible to file a consolidated income tax return, and if
    7-4  it is advantageous to the gas utility to do so, income taxes shall
    7-5  be computed as though a consolidated return had been so filed and
    7-6  the utility had realized its fair share of the savings resulting
    7-7  from the consolidated return, unless it is shown to the
    7-8  satisfaction of the regulatory authority that it was reasonable to
    7-9  choose not to consolidate returns.  The amounts of income taxes
   7-10  saved by a consolidated group of which a gas utility is a member by
   7-11  reason of the elimination in the consolidated return of the
   7-12  intercompany profit on purchases by the gas utility from an
   7-13  affiliate shall be applied to reduce the cost of the property or
   7-14  services so purchased.  The investment tax credit allowed against
   7-15  federal income taxes, to the extent retained by the utility, shall
   7-16  be applied as a reduction in the rate-based contribution of the
   7-17  assets to which the credit applies, to the extent and at the rate
   7-18  allowed by the Internal Revenue Code.
   7-19        (e)  The regulatory authority may promulgate reasonable rules
   7-20  and regulations complying with this section with respect to
   7-21  including and not including certain expenses in the computation of
   7-22  the rates to be established.
   7-23        SECTION 5.  The changes made by Section 2 of this Act to
   7-24  Section 5.06, Gas Utility Regulatory Act (Article 1446e, Vernon's
   7-25  Texas Civil Statutes), apply only to a rate proceeding for which
    8-1  the statement of intent is filed on or after the effective date of
    8-2  this Act.  A rate proceeding for which the statement of intent was
    8-3  filed before the effective date of this Act is governed by Section
    8-4  5.06, Gas Utility Regulatory Act (Article 1446e, Vernon's Texas
    8-5  Civil Statutes), as it existed when the statement of intent was
    8-6  filed, and that law is continued in effect for that purpose.
    8-7        SECTION 6.  The importance of this legislation and the
    8-8  crowded condition of the calendars in both houses create an
    8-9  emergency and an imperative public necessity that the
   8-10  constitutional rule requiring bills to be read on three several
   8-11  days in each house be suspended, and this rule is hereby suspended,
   8-12  and that this Act take effect and be in force from and after its
   8-13  passage, and it is so enacted.