BILL ANALYSIS


                                                         H.B. 176
                                          By: Stiles (Armbrister)
                                                    State Affairs
                                                         05-15-95
                              Senate Committee Report (Unamended)
BACKGROUND

Currently, the Gas Utility Regulatory Act (GURA) allows utilities
and their affiliated companies to file a consolidated federal tax
return if it results in an overall tax savings to the corporation. 
The tax savings attributable to the utility company are flowed
through to utility customers, while the tax savings attributable to
the non-utility affiliates remain with the individual affiliates.

However, recent Texas Supreme Court decisions in the Act have held
that the income tax advantages from affiliated, non-utility
companies must be used in reducing the utility's tax obligation. 
This interpretation would be a disincentive for gas companies to
launch ventures such as natural gas vehicles, gas conditioning,
etc. because it reduces the tax benefits normally given to start-up
businesses.

PURPOSE

As proposed, H.B. 176 amends the method of calculation of tax
savings and expenses for a utility company. 

RULEMAKING AUTHORITY

It is the committee's opinion that rulemaking authority is granted
to the Texas Railroad Commission or the governing body of a
municipality, depending upon the context, in SECTION 1 (Section
5.06(e), Article 1446e, V.T.C.S.) of this Act.

SECTION BY SECTION ANALYSIS

SECTION 1. Amends Section 5.06, Article 1446e, V.T.C.S. (Gas
Utility Regulatory Act) as follows:

     Sec. 5.06.  COMPONENTS OF NET INCOME.  (a)  Requires the
     components of net income used to establish just and reasonable
     rates to be determined in accordance with this section.
     
     (b)  Redefines "net income."
       
       (c)  Redesignated from existing Subsection (b).  Makes
       conforming changes.
       
       (d)  Requires the related income tax deduction or benefit to
       be included in the computation of income tax expense to
       reduce the rates if an expense is allowed to be included in
       utility rates, or an investment is included in the utility
       rate base.  Prohibits the related income tax deduction or
       benefit from being included in the computation of income tax
       expense to reduce the rates if an expense is disallowed or
       not included in utility rates, or an investment is not
       included in the utility rate base.  Requires the income tax
       expense to be computed using the statutory income tax rates. 
       Deletes existing Subsection (c).
       
       (e)  Authorizes the regulatory authority to promulgate
       reasonable rules and regulations complying with this section
       with respect to including and not including certain expenses
       in the computation of the rates to be established.
       
       (f)  Provides that this legislation is not intended to
       increase gas utility rates to the consumer not caused by
       utility service.  Requires utility rates to include only
       expenses caused by utility service.
       
SECTION 2. Makes application of this Act prospective.

SECTION 3. Emergency clause.
           Effective date: upon passage.