73R10080 DWS-F
          By Carriker                                            S.B. No. 421
          Substitute the following for S.B. No. 421:
          By Cook                                            C.S.S.B. No. 421
                                 A BILL TO BE ENTITLED
    1-1                                AN ACT
    1-2  relating to the rates of a gas utility.
    1-3        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
    1-4        SECTION 1.  Section 3.05(e), Gas Utility Regulatory Act
    1-5  (Article 1446e, Vernon's Texas Civil Statutes), is amended to read
    1-6  as follows:
    1-7        (e)  The railroad commission shall hear the appeal de novo
    1-8  based on the test year presented to the municipality, adjusted for
    1-9  known changes and conditions that are measurable with reasonable
   1-10  accuracy, and by its final order, which shall be entered not more
   1-11  than 185 days from the date the appeal is perfected, the railroad
   1-12  commission shall fix such rates that the municipality should have
   1-13  fixed in the ordinance from which the appeal was taken.  In the
   1-14  event that the railroad commission fails to enter its final order
   1-15  within 185 days from the date the appeal is perfected, the schedule
   1-16  of rates proposed by the utility shall be deemed to have been
   1-17  approved by the commission and effective upon the expiration of the
   1-18  185-day period.  Any rates, whether temporary or permanent, set by
   1-19  the railroad commission shall be prospective and observed from and
   1-20  after the applicable order of the railroad commission.  However,
   1-21  <except> interim <rate> orders establishing temporary rates
   1-22  necessary to provide the utility the opportunity to avoid
   1-23  confiscation during the 185-day period may be made effective
   1-24  <beginning> on the date of filing of the <a> petition for review
    2-1  with the railroad commission <and ending on the date of a final
    2-2  order setting rates>.  The railroad commission may order a refund
    2-3  with interest of amounts collected under temporary rates through a
    2-4  payment to customers from whom those amounts were collected or
    2-5  through a payment or credit to each affected class of customers.
    2-6        SECTION 2.  Section 5.06, Gas Utility Regulatory Act (Article
    2-7  1446e, Vernon's Texas Civil Statutes), is amended to read as
    2-8  follows:
    2-9        Sec. 5.06.  Components of Net Income.  (a)  The components of
   2-10  net income used to establish just and reasonable rates shall be
   2-11  determined in accordance with this section.
   2-12        (b)  "Net income" means the total revenues of the gas utility
   2-13  from gas utility service less all reasonable and necessary expenses
   2-14  related to that gas utility service as determined by the regulatory
   2-15  authority.  The regulatory authority shall determine those expenses
   2-16  and revenues in a manner consistent with Subsections (c)-(e)
   2-17  <(b)-(d)> of this section.
   2-18        (c) <(b)>  Payment to affiliated interests for costs of any
   2-19  services, or any property, right, or thing, or for interest expense
   2-20  may not be used to establish just and reasonable rates for gas
   2-21  utility service <allowed> either as capital costs or as expense
   2-22  related to gas utility service except to the extent that the
   2-23  regulatory authority shall find such payment to be reasonable and
   2-24  necessary for each item or class of items as determined by the
   2-25  regulatory authority <railroad commission>.  Any such finding shall
   2-26  include specific findings of the reasonableness and necessity of
   2-27  each item or class of items included in the establishment of the
    3-1  rates <allowed> and a finding that the price to the gas utility is
    3-2  no higher than prices charged by the supplying affiliate to its
    3-3  other affiliates or divisions for the same item or class of items,
    3-4  or to unaffiliated persons or corporations.
    3-5        (d)  If an expense is allowed to be included in utility
    3-6  rates, or an investment is included in the utility rate base, the
    3-7  related income tax deduction or benefit shall be included in the
    3-8  computation of income tax expense to reduce the rates.  If an
    3-9  expense is disallowed or not included in utility rates, or an
   3-10  investment is not included in the utility rate base, the related
   3-11  income tax deduction or benefit may not be included in the
   3-12  computation of income tax expense to reduce the rates.  The income
   3-13  tax expense shall be computed using the statutory income tax rates.
   3-14        <(c)  If the gas utility is a member of an affiliated group
   3-15  that is eligible to file a consolidated income tax return, and if
   3-16  it is advantageous to the gas utility to do so, income taxes shall
   3-17  be computed as though a consolidated return had been so filed and
   3-18  the utility had realized its fair share of the savings resulting
   3-19  from the consolidated return, unless it is shown to the
   3-20  satisfaction of the regulatory authority that it was reasonable to
   3-21  choose not to consolidate returns.  The amounts of income taxes
   3-22  saved by a consolidated group of which a gas utility is a member by
   3-23  reason of the elimination in the consolidated return of the
   3-24  intercompany profit on purchases by the gas utility from an
   3-25  affiliate shall be applied to reduce the cost of the property or
   3-26  services so purchased.  The investment tax credit allowed against
   3-27  federal income taxes, to the extent retained by the utility, shall
    4-1  be applied as a reduction in the rate based contribution of the
    4-2  assets to which the credit applies, to the extent and at the rate
    4-3  allowed by the Internal Revenue Code.>
    4-4        (e) <(d)>  The regulatory authority may promulgate reasonable
    4-5  rules and regulations complying with this section with respect to
    4-6  including and not including <the allowance or disallowance of>
    4-7  certain expenses in the computation of the rates to be established
    4-8  <for ratemaking purposes>.
    4-9        SECTION 3.  Section 5.08(a), Gas Utility Regulatory Act
   4-10  (Article 1446e, Vernon's Texas Civil Statutes), is amended to read
   4-11  as follows:
   4-12        (a)  No utility may increase its rates except by filing a
   4-13  statement of intent with the regulatory authority having original
   4-14  jurisdiction at least 35 days prior to the effective date of the
   4-15  proposed increase.  The statement of intent shall include proposed
   4-16  revisions of tariffs and schedules and a statement specifying in
   4-17  detail each proposed increase, the effect the proposed increase is
   4-18  expected to have on the revenues of the company, the classes and
   4-19  numbers of utility consumers affected, and other information
   4-20  required by the regulatory authority's rules and regulations.  A
   4-21  copy of the statement shall be mailed or delivered at the time of
   4-22  filing to the appropriate officer of each affected municipality.
   4-23  Notice<, and notice> shall also be given by publication of a notice
   4-24  to the public in conspicuous form and place <by placing a notice to
   4-25  the public of the proposed increase once in each week for four
   4-26  successive weeks> in a newspaper having general circulation in each
   4-27  county containing territory affected by the proposed increase.  The
    5-1  notice shall be published for four successive weeks before the
    5-2  effective date of the proposed increase.  In addition to newspaper
    5-3  publication, the utility shall deliver notice of the proposed
    5-4  increase to all affected utility customers by mail or bill insert
    5-5  before the effective date of the proposed increase.  Notice shall
    5-6  also be given by delivery of notice <and> to such other affected
    5-7  persons as required by the regulatory authority's rules and
    5-8  regulations.  The <However, notwithstanding the above, instead of
    5-9  the> publication of newspaper notice is not required <contemplated
   5-10  above, a gas utility may provide notice to the public> in areas
   5-11  outside the limits of the municipalities<,> and within the limits
   5-12  of municipalities with a population of less than 2,500 according to
   5-13  the most recent federal census <by mailing such notice by United
   5-14  States mail, postage prepaid, to the billing address of each
   5-15  directly affected customer, or by including the notice in such
   5-16  customer's bill in a conspicuous form>.
   5-17        SECTION 4.  The importance of this legislation and the
   5-18  crowded condition of the calendars in both houses create an
   5-19  emergency and an imperative public necessity that the
   5-20  constitutional rule requiring bills to be read on three several
   5-21  days in each house be suspended, and this rule is hereby suspended.