BILL ANALYSIS State Affairs Committee By: Black 03-19-95 5-6-95 BACKGROUND The Public Utility Commission of Texas (PUC) was created in 1975 and is responsible for regulating electric and telephone utilities in Texas. Currently, PUC has oversight of investor-owned utilities, electric cooperatives, river authorities, local telephone companies, and the dominant carrier of long-distance service in the state. Cities have retained original ratemaking authority for electric utilities and cooperatives operating within their boundaries, but the commission reviews these rates on an appellate basis. The commission also reviews on appeal the rates of city utilities serving customers outside of their city limits. PURPOSE HB 1777 allows telephone cooperatives and small telephone companies to opt out of PUC's rate regulation authority and provides safeguards to protect customers. 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 SECTION 1. Amends Subtitle E, Title III, Public Utility Regulatory Act of 1995, as enacted by SB 319, Acts of the 74th Legislature, Regular Session, 1995, by amending Section 3.213 and adding Section 3.2135 as follows: Sec. 3.213. Amends regulatory policy on small local exchange companies and telephone cooperatives. Establishes legislative policy regarding incentives and flexibility to allow local exchange companies serving rural areas to provide existing services and introduce new technology and services. Allows a cooperative or local exchange company with fewer than 31,000 access lines to offer extended local calling services or new services on an optional basis or make minor changes in its rates or tariffs if the company files a statement of intent with the PUC, provides timely notice to affected customers, and files an affidavit with the PUC. Provides for commission review a proposed change if it receives complaints from the lesser of five percent or 1,500 customers; it receives a complaint from an intrastate access customer or group of customers accounting for more than 10 percent of the company's total intrastate access revenues; the change is not a minor change, as defined; the company does not comply with procedural requirements; or the change is inconsistent with the PUC's substantive policies. Authorizes the PUC to suspend the proposed tariff during its review. Deletes existing provisions for cooperatives with fewer than 5,000 access lines to change rates under specified conditions. Allows companies to provide its board members, officers, employees, and agents free or reduced rates for services. Requires the PUC to review and revise or eliminate any policies, reporting requirements, and rules that place unnecessary burdens or expenses on rural and small local exchange companies and cooperatives. Authorizes the commission to adopt policies that affect a company's ability to do business. Authorizes the commission to adopt other policies related to small companies that it considers appropriate. Extends the PUC's authority to collect fees from local exchange companies to cover the regulatory costs associated with the partial deregulation of telephone cooperatives. Excludes partially deregulated cooperatives from the requirements of the section, except for the policy review provisions. Section 3.2135. Provides for the partial deregulation of a local exchange company that is a cooperative corporation upon vote of membership. After balloting, the cooperative may offer extended local calling services, optional new services, or make changes in rates or tariffs if the cooperative: provides notice to all customers and municipalities; files with the commission affidavits verifying the provision of notice; and files a statement of intent. A statement of intent must be filed with the commission and the office not later than the 61st day before the change will take effect and must include: a copy of a resolution signed by a majority of the cooperative's board of directors; a description of the services affected by the proposed action; a copy of the proposed tariff; and a copy of the customer notice. The cooperative shall provide to all affected customers and parties, including municipalities, at least two notices of the proposed action. Notices must include: a description of the services; the effective date; an explanation of the right to petition the commission for a review; an explanation of the right to obtain a copy of the proposed tariff from the cooperative; the amount by which the cooperative's revenues will increase or decrease; and a list of rates that are affected. The cooperative shall file with the commission affidavits verifying the cooperative provided notice. The commission shall review a proposed action if: the commission receives complaints signed by 5 percent of the customers or from intrastate access customers that account for more than 10 percent of the cooperative's intrastate access revenues; the cooperative does not comply with the procedural requirements; or the proposed action is inconsistent with the commission's substantive policies as expressed in its rules. If the commission reviews the proposed action, the commission may suspend the actions of the cooperative during the pendency of the review. A cooperative that is partially deregulated may vote to reverse the deregulation by sending a ballot to each cooperative member. The cooperative's board of directors shall reballot upon its own motion or receipt of a written request of 10 percent of its members. The commission shall prescribe the voting procedures a cooperative is required to use under this section. SECTION 2. Effective date: September 1, 1995. SECTION 3. Emergency clause. COMPARISON OF ORIGINAL TO SUBSTITUTE The substitute simply recodifies the original to comply with the Public Utility Regulatory Act of 1995, as enacted by SB 319, Acts of the 74th Legislature, Regular Session, 1995. SUMMARY OF COMMITTEE ACTION Pursuant to public notice posted on March 15, 1995, HB 1777 was considered by the Committee on State Affairs in a public hearing on March 20, 1995. The Chair laid out HB 1777 and recognized Rep. Seidlits to explain the bill. The following persons testified for the bill: Calvin Weinheimer representing the Texas Telephone Association; Jim Whitefield representing the President of the Texas Statewide Telephone Cooperative, Inc. The Chair left HB 1777 pending. The committee considered HB 1777 in a formal meeting on May 2, 1995. The Chair laid out HB 1777. The committee considered a complete substitute for the bill which 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 12 ayes, 0 nays, 0 pnv, 3 absent.