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.