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.