BILL ANALYSIS



C.S.H.B. 1715
By: CRADDICK
May 4, 1995
Committee Report (Substituted)


BACKGROUND

Texas production of hydrocarbons continues to decline. Production
from marginal oil and gas wells continues to be shut-in. This
production loss results in lost tax revenues to school districts,
local government and the state. It also results in the loss of
electrical load for utilities. 

One of the biggest costs associated with the production of marginal
oil and gas wells is the cost of electricity. Utilities and the
Public Utility Commission state that other than a rate case for
each field, they lack the legal authority to address the electrical
rates charged for these fields.  Individual rate cases can take up
to one and a half years to be heard at the Public Utility
Commission. With over a thousand fields at issue, addressing this
matter through the regulatory route will result in additional
production being shut-in and lost, and it will cost the producers
and the utilities additional costs in legal fees.


PURPOSE

This bill will create a special electrical charge for marginal oil
and gas properties and customers who would otherwise terminate or
reduce service from an electric utility. The result will be the
extension of the economic life of oil and gas fields in the state
thus extending tax revenue streams for schools, counties and the
state. This bill also will result in the continuation of the
electrical loads associated with these fields. Presently, these
loads are being lost and the loss of revenue to the utilities is
being made up by the remaining consumers.


RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not expressly
grant any additional rulemaking authority to a state officer,
department, agency, or institution.


SECTION BY SECTION ANALYSIS

     C.S.H.B. 1715 amends the Public Utility Regulatory Act of 1995
(PURA), as enacted by S.B. 319, 74th Legislature, Regular Session,
1995, as follows:

SECTION 1.  Amends Section 1.003(14) to clarify the definition of
a "rate" as being approved by a regulatory authority. Exempts from
this definition a "price" charged to a customer for electric
service.

SECTION 2.  Amends Section 2.001 to make technical revisions to the
divisions of the definition of "public utility" and "utility." Adds
the definition of "price" as a charge to a customer for electricity
that is at or lower than a "rate" approved by a regulatory
authority.

SECTION 3.  Amends Subtitle D, Title II, by adding Sec. 2.1512,
entitled "PRICE RANGE" as follows:

     Subsection (a) Requires retail rates to be approved by the
regulatory authority to ensure that they are just and reasonable.
Allows an electric utility to charge individual customers a price
lower than the approved rate if:
     (1) the utility files notice of its price for each customer
classification with the P.U.C. and revises the notice when rate
changes are approved by the regulatory authority;
     (2) the minimum price is figured by subtracting 30% of the
demand-related cost from the approved rate;
     (3) the lower price will be charged to an existing customer
having received service for at least 36 months or a new customer;
     (4) the lower price is offered only to customers consuming
electricity within the area the utility is certified to serve; and,
     (5) the customer can show that:
           (A) without the reduced price, it will cease or reduce
service from the utility; or,
           (B) a reduced price will extend the economic life of a
well or group of wells that are considered marginal or are part of
an enhanced oil recovery project.

     Subsection (b) Prohibits a utility from offering or charging
a price lower than the minimum price for the applicable customer
class (as provided in Subsection (a)).

     Subsection (c) States that if a utility is charging a customer
a price that is lower than the rate approved, the utility is
required to submit to the regulatory authority:

     (1) the customer contract (including name and address of the
customer);
     (2) documentation showing the price charged is in compliance
with this section;
     (3) the approved rate that would have been charged;
     (4) a statement indicating if the customer is a new or
existing customer;
     (5) if an existing customer, the number of months they have
continuously received service           at the location now getting
the lower price; and,
     (6) sworn affidavits supporting information used to determine
eligibility for the price.

     Subsection (d) Gives the P.U.C. exclusive original
jurisdiction to review prices charged under this section. On
complaint by an affected person or competing utility, the P.U.C. is
required to determine compliance. If a price is determined to be
outside the allowed range, the P.U.C. may disallow it.

     Subsection (e) States that except as provided by other
provisions of this section, a utility may not offer a price lower
than the lowest approved rate to a customer in an area certified
for service from multiple electric utilities.

     Subsection (f) Prevents this section from affecting the
authority of the regulating authority to change or establish new
rates as provided in other sections of PURA. States that this
section does not affect the validity of previously set rates.

     Subsection (g) Allows an electric utility to charge lower
prices for customers receiving wholesale electric service if the
price:

     (1) applies only to the retail priced portion of a customer's
electrical load;
     (2) is not less than the utility's marginal cost for that
portion; and,
     (3) is not discounted by more than 10% of the customer's
average-demand-related cost        for that portion.

SECTION 4.  Amends Section 2.154(b) to exempt lower prices charged
to individual customers from being required to be filed with the
regulating authority under this section. Requires the regulating
authority to consider any individual customer price filed as secret
and exempts such information from disclosure under the Open Record
Act.

SECTION 5.  Amends Section 2.202 to clarify that rates approved by
the regulatory authority may not be unreasonably preferential or
discriminatory. Prohibits prices from being higher than rates set
by the regulatory authority.

SECTION 6.  Amends Section 2.214 to clarify that prices charged
below rates set by the regulatory authority are not to be
considered an impermissible difference, preference or advantage.

SECTION 7.  Amends Section 2.215(a) to allow a public utility to
charge less than the rates prescribed by the P.U.C., and to allow
customers to pay that lesser price.

SECTION 8.  Effective Date: September 1, 1995.

SECTION 9.  Emergency Clause.


COMPARISON OF ORIGINAL TO SUBSTITUTE

The original bill amended Chapter 10, Title 32, Revised Statutes,
to require electric utilities and electric cooperatives to offer
marginal oil and gas well operators a reduced electric rate. The
substitute amends the Public Utility Regulatory Act (S.B. 319 as
enrolled this session) to allow an electric utility to adopt a
flexible pricing plan that would provide a reduced rate to
customers (including marginal well operators) who would otherwise
be forced to terminate electric service.


SUMMARY OF COMMITTEE ACTION

H.B. 1715 was considered by the Energy Resources Committee in a
public hearing on March 13, 1995. At the request of the author, the
bill was left pending.

H.B. 1715 was considered by the Energy Resources Committee in a
public hearing on April 10, 1995. The bill was laid on the table
subject to call without objection.

H.B. 1715 was considered by the Energy Resources Committee in a
public hearing on April 24, 1995. The committee considered a
complete substitute for the bill. The following witnesses testified
in favor of the bill:

     Wayne Roesler, representing the Association of Electric
Utilities of Texas;
     Larry Aimes, representing Meridian Oil Inc.;
     Eileen Campbell, representing Marathon Oil Company; and,
     Ed Howard, representing TIPRO and several other oil and gas
associations.

Campbell McGinnis, representing Texas Electric Cooperatives, Inc.,
testified against the bill.

Bret Slocum of the Public Utility Commission testified neutrally on
the bill.

The bill and the substitute were left pending.

H.B. 1715 was considered by the Energy Resources Committee in a
public hearing on May 2, 1995. The substitute considered on April
24, 1995 was adopted without objection. The bill was reported
favorably as substituted, with the recommendation that it do pass
and be printed, by a record vote of 7 ayes, 0 nays, 0 PNV, and 2
absent.